Optimizing Finance for Development
The World Bank Group recently adopted the "cascade framework" to "maximize finance for development." The cascade recommends that reforms be tried first, followed by subsidies, and then public investments. To understand the econo...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/859191517234026362/Optimizing-finance-for-development http://hdl.handle.net/10986/29286 |
| Summary: | The World Bank Group recently adopted
the "cascade framework" to "maximize finance
for development." The cascade recommends that reforms
be tried first, followed by subsidies, and then public
investments. To understand the economics of the cascade,
this paper presents a model where reforms, subsidies, and
public investments can be used to fill the investment gap,
and computes the welfare associated with their different
sequencing. The cascade is optimal when reforms increase
efficiency at no cost. When they are costly, if policies can
be project specific, their sequencing does not matter; if
not, the cascade can be optimal if agents are myopic, but
not if they are forward-looking. Tensions may thus arise
between maximizing private financing and optimizing
financing for development. |
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