How Effective are Second-Generation Road Funds? A Preliminary Appraisal

Posted: 29 Feb 2008

See all articles by Ken Gwilliam

Ken Gwilliam

University of Leeds - Institute for Transport Studies

Ajay Kumar

Polytechnic University - Department of Chemical Engineering & Chemistry

Abstract

Underfunded, inefficient road maintenance is a perennial problem in many developing economies. To address it, some countries have created "second-generation" road funds that are financed by fuel levies and managed by boards representing the interests of road users. Macro-economists often oppose such funds, arguing that this earmarking of revenue reduces fiscal flexibility. Some argue that such road funds should be seen as an interim step toward fully commercialized road maintenance or good public sector governance - and hence subject to sunset provisions. Decisions on whether to retain (or create) such funds should then be based on their effects on resource allocation, operational efficiency, and rent seeking. Using evidence on new road funds in Africa, this article finds that they have not undermined fiscal flexibility. Moreover, they have improved the administration of road funding (in terms of execution capability) and its outputs (in terms of road conditions). So, although criteria for assessing road funds remain relevant, the funds should not automatically be considered temporary mechanisms. But when establishing new funds, government's continued role in approving spending on road maintenance should be explicitly recognized.

Suggested Citation

Gwilliam, Ken and Kumar, Ajay, How Effective are Second-Generation Road Funds? A Preliminary Appraisal. World Bank Research Observer, Vol. 18, No. 1, pp. 113-128, Spring 2003, Available at SSRN: https://ssrn.com/abstract=873717

Ken Gwilliam (Contact Author)

University of Leeds - Institute for Transport Studies ( email )

36-40 University Road
Room G02
Leeds LS2 9JT
United Kingdom
+ 44 0 113 343 6610 (Phone)

HOME PAGE: http://www.its.leeds.ac.uk/staff/staffProfile.php?personId=15

Ajay Kumar (Contact Author)

Polytechnic University - Department of Chemical Engineering & Chemistry ( email )

Six Metrotech Center
Brooklyn, NY 11201
United States
718-260-3027 (Phone)
718-875-9646 (Fax)

HOME PAGE: http://chem.poly.edu/gross/ajayk.cfm

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