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Public and Private Sector Discount Rates in Public-Private Partnerships

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  • Paul A. Grout

    (University of Bristol)

Abstract

Whether public sector projects should be discounted at a lower rate than private sector projects is highly contentious. This paper assesses the appropriate private and public sector discount rates in the context of public private partnerships. It shows that there are powerful arguments for using a higher rate to discount private projects than public sector projects and that failure to recognise this may lead to excessive reliance on public provision. However, the reason for the divergence is not related to the conventional incomplete market arguments in the literature. The results may have far broader implications for private sector involvement in public services. Copyright Royal Economic Society 2003

Suggested Citation

  • Paul A. Grout, 2003. "Public and Private Sector Discount Rates in Public-Private Partnerships," Economic Journal, Royal Economic Society, vol. 113(486), pages 62-68, March.
    • Handle: RePEc:ecj:econjl:v:113:y:2003:i:486:p:c62-c68
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    More about this item

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate

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