Join us for a Dean’s Research Seminar with Linda Fernandez, Ph.D., associate professor in the Department of Economics with a joint appointment in the VCU Center for Environmental Studies, presenting “Revealed Preferences of a Public Bank Investing in Environmental Infrastructure” (abstract below).

Faculty and staff RSVP: Please RSVP by noon this Thursday, Sept. 17, by confirming 'Yes' to the forthcoming Google calendar invite. Lunch will include burritos.

Abstract: Investment decisions by The North American Development Bank (NADBank) over 30 years offer empirical context to follow McFadden (1975) and Sen (1977) in utilizing observed decisions for revealing preferences by a public institution. NADBank, with funding by U.S. and Mexico formalized in international trade side agreements (NAFTA/USMCA), has a mandate for environmental infrastructure investment.

While qualitative critiques suggest NADBank spending has been slow [(Kass and McCarroll, 2008),(U.S. GAO, 2000)], there has not been formal quantitative analysis of NADBank. Econometric analysis helps determine statistically significant factors for infrastructure investment with 30 years of panel data across varied geographic locations and different timing of development and completion of the projects.

Results show NADBank follows sound financial management in several ways. Statistically significant portfolio diversification across project type (water, solid waste, air pollution), controlling for cost, population served, state and time fixed affects persists over time. Preference for investment to address transboundary environmental quality in shared airsheds and watersheds is statistically significant, thereby meeting NADBank’s original mandate. The polluter pays principle results with statistical significance in decomposing directional investment in upstream versus downstream locations of transboundary infrastructure.

Further investigation into decisions between financial instruments (loans versus grants) reveals NADBank tailors financing to differences in project characteristics and potential repayment capacity.