Conducting Fiscal Incidence Analysis for Sustainability: The Case of Government Infrastructure Spending

Who benefits from government fiscal policies? Providing an answer to this question is a crucial element in maintaining the sustainability of government policies. In this paper we extend traditional tax incidence studies to benefit incidence studies, focusing especially on the incidence of government-provided public goods in the form of urban transportation infrastructure spending. We develop a new approach to benefit incidence studies—a “time-savings approach”—that allows us both to measure individual access to government infrastructure programs and to estimate the time savings to individual households from these infrastructure programs. We then apply this time-savings approach in two detailed applications, using micro-level and geo-spatial data from Indonesia and Mozambique. We find that the time-savings approach has the potential to provide estimates at the household level of the monetary value of government urban infrastructure improvements via the value of reduced travel time, illustrating the power of this approach in allocating and valuing the benefits of public goods like transportation infrastructure spending for individual households. Fully realizing the potential of the time-savings approach requires access to data with accurate time and distance variables at the household level.