01948cas a2200277 a 4500 AALejournalIMF016231 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513529981 1018-5941 BD-DhAAL BD-DhAAL Gurara, Daniel. On the Capacity to Absorb Public Investment : How Much is Too Much? / Daniel Gurara, Kangni Kpodar, Andrea Presbitero, Dawit Tessema. Washington, D.C. : International Monetary Fund, 2020. 1 online resource (37 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students While expanding public investment can help filling infrastructure bottlenecks, scaling up too much and too fast often leads to inefficient outcomes. This paper rationalizes this outcome looking at the association between cost inflation and public investment in a large sample of road construction projects in developing countries. Consistent with the presence of absorptive capacity constraints, our results show a non-linear U-shaped relationship between public investment and project costs. Unit costs increase once public investment is close to 10% of GDP. This threshold is lower (about 7% of GDP) in countries with low investment efficiency and, in general, the effect of investment scaling up on costs is especially strong during investment booms. Mode of access: Internet Kpodar, Kangni. Presbitero, Andrea. Tessema, Dawit. IMF Working Papers; Working Paper ; No. 2020/048 Full text available on IMF http://elibrary.imf.org/view/journals/001/2020/048/001.2020.issue-048-en.xml IMF e-Library