Incentive Compatible Reforms : The Political Economy of Public Investments in Mongolia
Why do politicians distort public investments? And given that public investments are poor because presumably that is what is politically rational, what types of reforms are likely to be both efficiency improving and compatible with the interests of...
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| Format: | Policy Research Working Paper |
| Language: | English |
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2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110524081958 http://hdl.handle.net/10986/3430 |
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okr-10986-3430 |
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oai_dc |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ACCOUNTABILITY ACCOUNTING AGGREGATE LIMITS ALLEGIANCE ALLOCATION ANNUAL BUDGET APPROPRIATION APPROPRIATIONS ASSET PORTFOLIO BID BIDS BUDGET AMENDMENTS BUDGET BALANCE BUDGET CYCLE BUDGET EXECUTION BUDGET INSTITUTIONS BUDGET LEGISLATION BUDGET PLANNING BUDGET PREPARATION BUDGET PREPARATION PROCESS BUDGET PROCESS BUDGET PROPOSALS BUDGETARY APPROPRIATIONS BUDGETARY AUTHORITY BUDGETING BUDGETING PROCESS BUSINESS COMMUNITY CABINET CANDIDATES CAPITAL ASSET CAPITAL ASSETS CAPITAL BUDGET CAPITAL BUDGETING CAPITAL EXPENDITURES CAPITAL PROJECTS CAPITAL STOCK CASH TRANSFER CHECKS CHECKS AND BALANCES CIVIL SERVANTS CIVIL SOCIETY COALITION GOVERNMENTS COLLECTIVE ACTION COMMUNISM COMPETITIVE BIDDING CONSTITUENCIES CONSTITUENCY COST ESTIMATES COST-BENEFIT ANALYSIS DEBTS DEFICITS DEMOCRACIES DEMOCRACY DEMOCRATIC GOVERNMENTS DEMOCRATIC SYSTEM DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT BANK DIVISION OF RESPONSIBILITIES DOMESTIC INVESTMENT DONOR ASSISTANCE DUAL BUDGET SYSTEM DUAL BUDGETING ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC RESOURCE ECONOMIES OF SCALE EDUCATION LEVEL ELECTION ELECTIONS ELECTORAL SYSTEM ELECTORATE ENROLLMENT ETHNIC GROUPS EXECUTIVE BUDGET EXPENDITURE EXPENDITURE CATEGORIES EXPENDITURE CUTS EXPENDITURE GROWTH EXPENDITURES EXTERNALITY FACTION FINANCIAL ANALYSIS FISCAL AUTHORITY FISCAL CONSTRAINTS FISCAL DISCIPLINE FISCAL FRAMEWORK FISCAL INDISCIPLINE FISCAL OUTCOMES FISCAL PERFORMANCE FISCAL RULES FISCAL STABILITY GDP GENERAL TAX REVENUES GEOGRAPHICAL CONSTITUENCIES GOVERNMENT EXPENDITURES HUMAN RESOURCE IDEOLOGY INCOME LEVELS INFLATION INFLATIONARY PRESSURES INFRASTRUCTURE INVESTMENT INFRASTRUCTURE INVESTMENTS INFRASTRUCTURE PROJECTS INTERNATIONAL BANK INTERNATIONAL FINANCIAL INSTITUTIONS INVENTORY INVESTING INVESTMENT BUDGET INVESTMENT PLAN INVESTMENT PLANS INVESTMENT PORTFOLIO INVESTMENT PROJECTS INVESTMENT PROPOSALS LACK OF CREDIBILITY LACK OF INFORMATION LEGAL FRAMEWORK LEGISLATIVE AUTHORITY LEGISLATIVE BUDGET LEGISLATIVE POWERS LEGISLATORS LOCAL GOVERNMENT LOCAL GOVERNMENTS MACRO-STABILITY MACROECONOMIC INSTABILITY MARKET FAILURES MEMBERS OF PARLIAMENT MINISTRY OF FINANCE MISALLOCATION OF RESOURCES MONETARY FUND MP MULTIYEAR PROJECTS NATIONAL DEVELOPMENT NATIONAL PRIORITIES NATURAL RESOURCES OPERATIONAL EFFICIENCY PARLIAMENTARIAN PARLIAMENTARIANS PARLIAMENTARY DEMOCRACY PARLIAMENTARY PROCEDURES PERVERSE INCENTIVES PHYSICAL ASSETS POLITICAL ECONOMY POLITICAL LANDSCAPE POLITICAL PARTIES POLITICAL PARTY POLITICAL POWER POLITICAL RISK POLITICAL SCIENCE POLITICIANS PORK-BARREL POVERTY REDUCTION PRIME MINISTER PRIVATE GOODS PRIVATE INVESTMENTS PROCUREMENT POLICY PROGRAMS PUBLIC CAPITAL PUBLIC DEMAND PUBLIC ECONOMICS PUBLIC EXPENDITURE PUBLIC EXPENDITURE MANAGEMENT PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC INVESTMENT PUBLIC INVESTMENT PROGRAM PUBLIC INVESTMENTS PUBLIC SECTOR PUBLIC SECTOR EMPLOYMENT RATE OF RETURN REAL EXCHANGE RATE REFORM EFFORTS REFORM STRATEGY REPUBLIC RESOURCE ALLOCATION RETURN ROAD CONSTRUCTION ROAD NETWORK SECTOR CEILINGS SENIORITY SOCIAL POLICY SOCIAL RETURN SOCIAL TRANSFER SOCIALISM STANDING COMMITTEES STRATEGIC PRIORITIES STRUCTURAL REFORMS TAX TAX BURDEN TRANSPARENCY TYPES OF REFORMS UNCERTAINTY |
| spellingShingle |
ACCOUNTABILITY ACCOUNTING AGGREGATE LIMITS ALLEGIANCE ALLOCATION ANNUAL BUDGET APPROPRIATION APPROPRIATIONS ASSET PORTFOLIO BID BIDS BUDGET AMENDMENTS BUDGET BALANCE BUDGET CYCLE BUDGET EXECUTION BUDGET INSTITUTIONS BUDGET LEGISLATION BUDGET PLANNING BUDGET PREPARATION BUDGET PREPARATION PROCESS BUDGET PROCESS BUDGET PROPOSALS BUDGETARY APPROPRIATIONS BUDGETARY AUTHORITY BUDGETING BUDGETING PROCESS BUSINESS COMMUNITY CABINET CANDIDATES CAPITAL ASSET CAPITAL ASSETS CAPITAL BUDGET CAPITAL BUDGETING CAPITAL EXPENDITURES CAPITAL PROJECTS CAPITAL STOCK CASH TRANSFER CHECKS CHECKS AND BALANCES CIVIL SERVANTS CIVIL SOCIETY COALITION GOVERNMENTS COLLECTIVE ACTION COMMUNISM COMPETITIVE BIDDING CONSTITUENCIES CONSTITUENCY COST ESTIMATES COST-BENEFIT ANALYSIS DEBTS DEFICITS DEMOCRACIES DEMOCRACY DEMOCRATIC GOVERNMENTS DEMOCRATIC SYSTEM DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT BANK DIVISION OF RESPONSIBILITIES DOMESTIC INVESTMENT DONOR ASSISTANCE DUAL BUDGET SYSTEM DUAL BUDGETING ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC RESOURCE ECONOMIES OF SCALE EDUCATION LEVEL ELECTION ELECTIONS ELECTORAL SYSTEM ELECTORATE ENROLLMENT ETHNIC GROUPS EXECUTIVE BUDGET EXPENDITURE EXPENDITURE CATEGORIES EXPENDITURE CUTS EXPENDITURE GROWTH EXPENDITURES EXTERNALITY FACTION FINANCIAL ANALYSIS FISCAL AUTHORITY FISCAL CONSTRAINTS FISCAL DISCIPLINE FISCAL FRAMEWORK FISCAL INDISCIPLINE FISCAL OUTCOMES FISCAL PERFORMANCE FISCAL RULES FISCAL STABILITY GDP GENERAL TAX REVENUES GEOGRAPHICAL CONSTITUENCIES GOVERNMENT EXPENDITURES HUMAN RESOURCE IDEOLOGY INCOME LEVELS INFLATION INFLATIONARY PRESSURES INFRASTRUCTURE INVESTMENT INFRASTRUCTURE INVESTMENTS INFRASTRUCTURE PROJECTS INTERNATIONAL BANK INTERNATIONAL FINANCIAL INSTITUTIONS INVENTORY INVESTING INVESTMENT BUDGET INVESTMENT PLAN INVESTMENT PLANS INVESTMENT PORTFOLIO INVESTMENT PROJECTS INVESTMENT PROPOSALS LACK OF CREDIBILITY LACK OF INFORMATION LEGAL FRAMEWORK LEGISLATIVE AUTHORITY LEGISLATIVE BUDGET LEGISLATIVE POWERS LEGISLATORS LOCAL GOVERNMENT LOCAL GOVERNMENTS MACRO-STABILITY MACROECONOMIC INSTABILITY MARKET FAILURES MEMBERS OF PARLIAMENT MINISTRY OF FINANCE MISALLOCATION OF RESOURCES MONETARY FUND MP MULTIYEAR PROJECTS NATIONAL DEVELOPMENT NATIONAL PRIORITIES NATURAL RESOURCES OPERATIONAL EFFICIENCY PARLIAMENTARIAN PARLIAMENTARIANS PARLIAMENTARY DEMOCRACY PARLIAMENTARY PROCEDURES PERVERSE INCENTIVES PHYSICAL ASSETS POLITICAL ECONOMY POLITICAL LANDSCAPE POLITICAL PARTIES POLITICAL PARTY POLITICAL POWER POLITICAL RISK POLITICAL SCIENCE POLITICIANS PORK-BARREL POVERTY REDUCTION PRIME MINISTER PRIVATE GOODS PRIVATE INVESTMENTS PROCUREMENT POLICY PROGRAMS PUBLIC CAPITAL PUBLIC DEMAND PUBLIC ECONOMICS PUBLIC EXPENDITURE PUBLIC EXPENDITURE MANAGEMENT PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC INVESTMENT PUBLIC INVESTMENT PROGRAM PUBLIC INVESTMENTS PUBLIC SECTOR PUBLIC SECTOR EMPLOYMENT RATE OF RETURN REAL EXCHANGE RATE REFORM EFFORTS REFORM STRATEGY REPUBLIC RESOURCE ALLOCATION RETURN ROAD CONSTRUCTION ROAD NETWORK SECTOR CEILINGS SENIORITY SOCIAL POLICY SOCIAL RETURN SOCIAL TRANSFER SOCIALISM STANDING COMMITTEES STRATEGIC PRIORITIES STRUCTURAL REFORMS TAX TAX BURDEN TRANSPARENCY TYPES OF REFORMS UNCERTAINTY Hasnain, Zahid Incentive Compatible Reforms : The Political Economy of Public Investments in Mongolia |
| geographic_facet |
East Asia and Pacific East Asia and Pacific East Asia Asia Mongolia |
| relation |
Policy Research working paper ; no. WPS 5667 |
| description |
Why do politicians distort public
investments? And given that public investments are poor
because presumably that is what is politically rational,
what types of reforms are likely to be both efficiency
improving and compatible with the interests of politicians?
This paper explores these two questions in the context of
Mongolia. It argues that Mongolian members of parliament
have an incentive to over-spend on smaller projects that
bring benefits to specific geographical localities and to
under-spend on large infrastructure that would bring
economic benefits to Mongolia on the whole. The incentive
for the former is that members of parliament internalize the
political benefits from the provision of particular,
targeted benefits to specific communities. The disincentive
for the latter is that large infrastructure carries a
political risk because the political faction in control of
that particular ministry would have access to huge rents and
become politically too powerful. The identity of these
"winners" is uncertain ex ante, given the
relatively egalitarian and ethnically homogenous nature of
Mongolia's society and polity. Anticipating this risk,
members of parliament are reluctant to fund these projects.
Since these large infrastructure projects are crucial for
national growth, neglecting them hurts all members of
parliament. Members of parliament will therefore support
reforms that collectively tie their hands by safeguarding
large, strategic investment projects from political
interference thereby ensuring that no political faction
becomes too powerful. This protection of mega-projects would
need to be part of a bargain that also allows geographical
targeting of some percentage of the capital budget. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Hasnain, Zahid |
| author_facet |
Hasnain, Zahid |
| author_sort |
Hasnain, Zahid |
| title |
Incentive Compatible Reforms : The Political Economy of Public Investments in Mongolia |
| title_short |
Incentive Compatible Reforms : The Political Economy of Public Investments in Mongolia |
| title_full |
Incentive Compatible Reforms : The Political Economy of Public Investments in Mongolia |
| title_fullStr |
Incentive Compatible Reforms : The Political Economy of Public Investments in Mongolia |
| title_full_unstemmed |
Incentive Compatible Reforms : The Political Economy of Public Investments in Mongolia |
| title_sort |
incentive compatible reforms : the political economy of public investments in mongolia |
| publishDate |
2012 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110524081958 http://hdl.handle.net/10986/3430 |
| _version_ |
1764386985718317056 |
| spelling |
okr-10986-34302021-04-23T14:02:09Z Incentive Compatible Reforms : The Political Economy of Public Investments in Mongolia Hasnain, Zahid ACCOUNTABILITY ACCOUNTING AGGREGATE LIMITS ALLEGIANCE ALLOCATION ANNUAL BUDGET APPROPRIATION APPROPRIATIONS ASSET PORTFOLIO BID BIDS BUDGET AMENDMENTS BUDGET BALANCE BUDGET CYCLE BUDGET EXECUTION BUDGET INSTITUTIONS BUDGET LEGISLATION BUDGET PLANNING BUDGET PREPARATION BUDGET PREPARATION PROCESS BUDGET PROCESS BUDGET PROPOSALS BUDGETARY APPROPRIATIONS BUDGETARY AUTHORITY BUDGETING BUDGETING PROCESS BUSINESS COMMUNITY CABINET CANDIDATES CAPITAL ASSET CAPITAL ASSETS CAPITAL BUDGET CAPITAL BUDGETING CAPITAL EXPENDITURES CAPITAL PROJECTS CAPITAL STOCK CASH TRANSFER CHECKS CHECKS AND BALANCES CIVIL SERVANTS CIVIL SOCIETY COALITION GOVERNMENTS COLLECTIVE ACTION COMMUNISM COMPETITIVE BIDDING CONSTITUENCIES CONSTITUENCY COST ESTIMATES COST-BENEFIT ANALYSIS DEBTS DEFICITS DEMOCRACIES DEMOCRACY DEMOCRATIC GOVERNMENTS DEMOCRATIC SYSTEM DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT BANK DIVISION OF RESPONSIBILITIES DOMESTIC INVESTMENT DONOR ASSISTANCE DUAL BUDGET SYSTEM DUAL BUDGETING ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICY ECONOMIC RESOURCE ECONOMIES OF SCALE EDUCATION LEVEL ELECTION ELECTIONS ELECTORAL SYSTEM ELECTORATE ENROLLMENT ETHNIC GROUPS EXECUTIVE BUDGET EXPENDITURE EXPENDITURE CATEGORIES EXPENDITURE CUTS EXPENDITURE GROWTH EXPENDITURES EXTERNALITY FACTION FINANCIAL ANALYSIS FISCAL AUTHORITY FISCAL CONSTRAINTS FISCAL DISCIPLINE FISCAL FRAMEWORK FISCAL INDISCIPLINE FISCAL OUTCOMES FISCAL PERFORMANCE FISCAL RULES FISCAL STABILITY GDP GENERAL TAX REVENUES GEOGRAPHICAL CONSTITUENCIES GOVERNMENT EXPENDITURES HUMAN RESOURCE IDEOLOGY INCOME LEVELS INFLATION INFLATIONARY PRESSURES INFRASTRUCTURE INVESTMENT INFRASTRUCTURE INVESTMENTS INFRASTRUCTURE PROJECTS INTERNATIONAL BANK INTERNATIONAL FINANCIAL INSTITUTIONS INVENTORY INVESTING INVESTMENT BUDGET INVESTMENT PLAN INVESTMENT PLANS INVESTMENT PORTFOLIO INVESTMENT PROJECTS INVESTMENT PROPOSALS LACK OF CREDIBILITY LACK OF INFORMATION LEGAL FRAMEWORK LEGISLATIVE AUTHORITY LEGISLATIVE BUDGET LEGISLATIVE POWERS LEGISLATORS LOCAL GOVERNMENT LOCAL GOVERNMENTS MACRO-STABILITY MACROECONOMIC INSTABILITY MARKET FAILURES MEMBERS OF PARLIAMENT MINISTRY OF FINANCE MISALLOCATION OF RESOURCES MONETARY FUND MP MULTIYEAR PROJECTS NATIONAL DEVELOPMENT NATIONAL PRIORITIES NATURAL RESOURCES OPERATIONAL EFFICIENCY PARLIAMENTARIAN PARLIAMENTARIANS PARLIAMENTARY DEMOCRACY PARLIAMENTARY PROCEDURES PERVERSE INCENTIVES PHYSICAL ASSETS POLITICAL ECONOMY POLITICAL LANDSCAPE POLITICAL PARTIES POLITICAL PARTY POLITICAL POWER POLITICAL RISK POLITICAL SCIENCE POLITICIANS PORK-BARREL POVERTY REDUCTION PRIME MINISTER PRIVATE GOODS PRIVATE INVESTMENTS PROCUREMENT POLICY PROGRAMS PUBLIC CAPITAL PUBLIC DEMAND PUBLIC ECONOMICS PUBLIC EXPENDITURE PUBLIC EXPENDITURE MANAGEMENT PUBLIC EXPENDITURES PUBLIC GOODS PUBLIC INVESTMENT PUBLIC INVESTMENT PROGRAM PUBLIC INVESTMENTS PUBLIC SECTOR PUBLIC SECTOR EMPLOYMENT RATE OF RETURN REAL EXCHANGE RATE REFORM EFFORTS REFORM STRATEGY REPUBLIC RESOURCE ALLOCATION RETURN ROAD CONSTRUCTION ROAD NETWORK SECTOR CEILINGS SENIORITY SOCIAL POLICY SOCIAL RETURN SOCIAL TRANSFER SOCIALISM STANDING COMMITTEES STRATEGIC PRIORITIES STRUCTURAL REFORMS TAX TAX BURDEN TRANSPARENCY TYPES OF REFORMS UNCERTAINTY Why do politicians distort public investments? And given that public investments are poor because presumably that is what is politically rational, what types of reforms are likely to be both efficiency improving and compatible with the interests of politicians? This paper explores these two questions in the context of Mongolia. It argues that Mongolian members of parliament have an incentive to over-spend on smaller projects that bring benefits to specific geographical localities and to under-spend on large infrastructure that would bring economic benefits to Mongolia on the whole. The incentive for the former is that members of parliament internalize the political benefits from the provision of particular, targeted benefits to specific communities. The disincentive for the latter is that large infrastructure carries a political risk because the political faction in control of that particular ministry would have access to huge rents and become politically too powerful. The identity of these "winners" is uncertain ex ante, given the relatively egalitarian and ethnically homogenous nature of Mongolia's society and polity. Anticipating this risk, members of parliament are reluctant to fund these projects. Since these large infrastructure projects are crucial for national growth, neglecting them hurts all members of parliament. Members of parliament will therefore support reforms that collectively tie their hands by safeguarding large, strategic investment projects from political interference thereby ensuring that no political faction becomes too powerful. This protection of mega-projects would need to be part of a bargain that also allows geographical targeting of some percentage of the capital budget. 2012-03-19T18:02:19Z 2012-03-19T18:02:19Z 2011-05-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110524081958 http://hdl.handle.net/10986/3430 English Policy Research working paper ; no. WPS 5667 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper East Asia and Pacific East Asia and Pacific East Asia Asia Mongolia |