Premium
The Public‐Sector Cost of Capital: An Empirical Test of Peltzman’s Conjecture *
Author(s) -
Moszoro Marian W.
Publication year - 2021
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12433
Subject(s) - public sector , volatility (finance) , private sector , economics , monetary economics , cash flow , government (linguistics) , cash , public capital , fiscal policy , finance , economy , public investment , linguistics , philosophy , economic growth
I test whether public‐sector ownership reduces conventional measures of market risk by using an event exogenous to the air transportation sector. I find that government‐sponsored enterprises show lower price volatility than non‐government‐sponsored enterprises, arguably due to the government’s ability to buffer government‐sponsored enterprises against demand and cost shocks. The upshot for jurisdictions with fiscal space is that cash flows under public‐sector provision should be discounted at a lower rate than cash flows under private‐sector provision.