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The Financing of Investment in Utility Assets
Author(s) -
Zafiris Nicos
Publication year - 2017
Publication title -
economic affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.24
H-Index - 18
eISSN - 1468-0270
pISSN - 0265-0665
DOI - 10.1111/ecaf.12225
Subject(s) - finance , investment (military) , scope (computer science) , welfare , economics , profit (economics) , equity (law) , balance (ability) , intergenerational equity , business , public economics , microeconomics , market economy , medicine , politics , political science , computer science , law , physical medicine and rehabilitation , programming language , ecology , sustainability , biology
Abstract This article concerns appropriate ways to finance investment in quasi‐public assets, such as those of utilities. Pursuing the principle of charging the user, analogies are drawn with not‐for‐profit investment, dedicated to the service of users. Focusing on intergenerational equity, an arguably typical pattern of intergenerational investment transactions is identified and proposed as a financing norm. It is shown that, while an investing generation will always experience a real resource cost, the burden can be alleviated in welfare terms if all new investment is financed by borrowing. Charges or taxes levied for maintenance and replacement of assets offer scope for improving the intergenerational welfare balance.