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While PPPs have not been as successful as expected, the various kinds of hybrid PPP project forms that have emerged may suggest ways in which PPPs can sustainably generate some value and meet some stakeholder expectations. These hybrids may indeed be successful, but in what ways do they represent significantly reduced expectations regarding the benefits of PPPs, as these projects were conceived in the 1990s? This chapter discusses what is perhaps the most dramatic compromise, the dominating role now played in most of these projects by subsidized or “blended” finance. Governments and their development partners pay for and manage most basic project preparation work, contribute to the capital costs of projects, and provide guarantees and other risk-mitigation mechanisms insisted on by private partners. How should blended finance like this be justified and managed to ensure against market distortion and wasted resources that could be used more productively elsewhere?

This chapter develops a framework for calculating the marginal cost of public funds (MCF) for commodity taxes. It extends the model developed in Chapter 2 by measuring the MCF when there are other distortions in the economy. These distortions include taxes on other commodities, positive and negative externalities in the production and consumption of commodities, imperfect competition, smuggling and tax evasion, and addiction. Thus, a major theme of the chapter is how market distortions can be incorporated in the measurement of the MCF. The final section summarizes studies of the marginal distortionary costs of commodity taxes. These studies are divided into those that focus on the MCFs for taxes on specific commodities, those that calculate the MCFs for general sales taxes, and those that calculate the MCFs for taxes on imports and exports.

Land remains one of the most sought-after collateral for credit in India despite being afflicted by deep structural, regulatory, and information-driven distortions. These distortions stem from years of fragmented policymaking, poor governance and a lack of political will that cuts across most States in our Union. Rational lenders, in the presence of weak property rights and high information asymmetry, have responded through conservative credit policies. This has constrained significantly the ability to unlock the full value of land, something that is necessary for continued economic growth. We provide an overview of these distortions and how they impact land markets as well as credit creation in this article. We enumerate the various types of distortions and explore interventions—regulatory, structural and technological—that have been used to mitigate them in the past. We examine newer solutions, such as block chains for land registries and paralegal titling that are promising but require selective implementation to be successful.

Valuation of health and mortality risks, environmental services, and other nonmarket goods are essential to cost-benefit analysis. But in developing countries, persistent market distortions may undermine the techniques typically used for valuation, which aim to devise monetary values for nonmarket goods using individual preferences. This chapter explores how different valuation techniques hold up where features such as disguised unemployment or exploitive finance obscure market valuation. After surveying a range of proposed methods, the chapter argues that the paired comparison approach, which is a relatively recent innovation in the design of surveys to elicit individual preferences, has important advantages in developing countries over both traditional contingent valuation approaches and revealed preference studies.

This chapter focuses on certain simplified cases where the market distortions associated with learning can be identified. It first describes the behavior of the monopolist. It then contrasts the monopoly outcome with the competitive outcome, focusing in particular on the case of symmetry. Next, it discusses the optimal government intervention, focusing on the special case of a two-sector model, in one of which there is learning which spills over to the other. In this case, it is shown that not only is a subsidy on manufacturing desirable, there is even some presumption that it should be larger with monopoly than with competition.

This chapter examines South Africa’s economic growth following democratic transition. It focuses on three principal constraints on growth. These constraints fall into three broad categories: market distortions, inadequate human capital provision and political economy questions. The chapter concludes that there has been little change in South Africa’s economic structure despite the democratic transformation. The economy continues to be dominated by an interaction of big business, big labour and big government, which impedes competition and the innovation it fosters.

Some aspects of household budgets cannot be dealt with by a combination of the labour market and a Citizen's Income. Disabilities can prevent people from earning a living, and they impose additional costs. An additional unconditional benefit might be appropriate, or alternatively means-tested benefits, which are less of a problem where they will not impose additional disincentives. Individualised care budgets will remain useful. Housing costs vary. In the absence of the substantial amounts of additional housing needed to reduce rent levels, either a means-tested housing benefit will still be needed, or a flat rate benefit adjusted for local housing costs. The latter would be simpler to administer, and it would not create the market distortions that accompany a means-tested benefit. Fuel costs pose similar problems, as households have little control over them. Here, as with housing costs, a Citizen's Income would provide additional opportunities to increase net income. Passported benefits, such as free school meals, are those currently conditional on being in receipt of means-tested benefits. With a Citizen's Income, fewer people will be on means-tested benefits. Some passported benefits might need to become universal, which would be no problem in the context of a progressive tax system.

Foreign direct investment (FDI) has, in the post-1991 period, acquired considerable importance in India. This chapter analyses the regional distribution of FDI flows and explores the role of urbanization in determining FDI location choices. Three points emerge from the chapter. First, the regional distribution of FDI in India is grossly uneven. Most FDI flows are directed to regions which are more urbanized and have metropolitan dominance. Second, urbanization and its associated factors such as market size, population density, and infrastructure such as road density and teledensity are important determinants of FDI. Third, relative to India’s share in global population and global GDP, India’s share in global FDI is small. The chapter points out that for India to be able to reap the potential benefits of FDI, it will need to make heavy investments in urban infrastructure and services and eliminate land market distortions and other market-related inefficiencies.