What Is Additional Funds Needed?
Public funds refer to public financial funds and other social public funds, which are funds raised and distributed through taxes, profits, fees, and debt.
Public funds
Right!
- Chinese name
- Public funds
- Foreign name
- Public funds
- Nature
- Economic terms
- Definition
- Public financial funds and other social public funds
- Public funds refer to public financial funds and other social public funds, which are funds raised and distributed through taxes, profits, fees, and debt.
- As long as the government levies taxes, it will distort and cost the economic system, unless the tax is a lump sum tax. From a social point of view, this cost is caused by the incremental cost of the funds raised by the tax over the amount of funds actually raised and used, and an additional cost that is borne by any project using public funds. If (1 + ) represents the marginal cost of public funds and PV (NFI) represents the present value of the project's net financial impact, then the cost of the financial impact is: [1]
- It should be noted that the adjustment factor (1 + ) will reduce the net present value of projects that are net users of fiscal funds, and will also increase the net present value of projects that can have a positive fiscal impact.
- The value of the adjustment coefficient is difficult to obtain. For this reason, the method adopted in practice is to calculate the financial impact of the project and test the sensitivity of the project's net present value to the value. However, if the project's financial impact and net present value are both positive, there is no need for sensitivity analysis at all. What is a reasonable value of ? The empirical estimate of is 0.7 to 1.29 (Devara-jan, Squire and Suthirwart-Narueput, 1995). Nevertheless, some people still think that any value of greater than 0.4 is questionable (see Harberger, 1995).