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Is Public-private Partnership an Optimal Mode of Provision of Infrastructure?

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  • Aman A. Bara and Bidisha Chakraborty

    (Jadavpur University)

Abstract

The present paper considers a closed economy model with infrastructure service which is an excludable, impure public good, e.g. metro railway service, electricity service, and telephone service etc. The physical capital required by infrastructure sector is provided by public-private partnership. Public and private investment may be complementary or substitute to each other in infrastructure production. We assume government runs a balanced budget. We find there exists unique, saddle path stable growth rate in both the cases. We find that PPP model is optimal in the provision of infrastructure no matter public capital and private capital are a substitute or complementary to each other. But, PPP solution is not growth maximizing in case of substitute relationship between the public capital and private capital. It also makes a comparative study of decentralized economy and command economy. We find that in case of substitute relationship between private capital and public capital, command economy growth rate is higher than the competitive economy growth rate but in the case of complementary relationship between two, command economy growth rate may not be higher than the competitive economy growth rate.

Suggested Citation

  • Aman A. Bara and Bidisha Chakraborty, 2019. "Is Public-private Partnership an Optimal Mode of Provision of Infrastructure?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 44(1), pages 97-123, March.
    • Handle: RePEc:jed:journl:v:44:y:2019:i:1:p:97-123
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    References listed on IDEAS

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    Cited by:

    1. Bara, Aman Appolinus & Chakraborty, Bidisha, 2019. "Why should the government provide the infrastructure through the Public-Private Partnership mode?," MPRA Paper 95008, University Library of Munich, Germany.

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    More about this item

    Keywords

    Infrastructure; Public-Private Partnership; Endogenous Growth;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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