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'Build It or Not': Normative and Positive Theories of Public-Private Partnerships

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Author Info
Martimort, David
Pouyet, Jérôme

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Abstract

This paper analyzes whether the two tasks of building infrastructures which are socially useful and managing those assets should be bundled or not. When performances contracts can be written, both tasks should be performed altogether by the same firm when a better design of the infrastructure helps also to save on operating costs (positive externality). Otherwise (negative externality), tasks should be kept split apart and undertaken by different units. In incomplete contracting environments where the quality of the infrastructure may be hard to describe in advance, we isolate conditions under which either the traditional form of public provision of services or the more fashionable public-private partnership optimally emerges. The latter dominates when there is a positive externality but the private benefits from owning assets are small enough. Finally, we take a political economy perspective and study how incentive schemes are modified under the threat of capture of the decision-makers.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5610.

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Date of creation: Apr 2006
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Handle: RePEc:cpr:ceprdp:5610

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Related research
Keywords: agency costs; bundling/unbundling; capture; public-private partnership;

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Find related papers by JEL classification:
H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Elisabetta Iossa & David Martimort, 2008. "The Simple Micro-Economics of Public-Private Partnerships," CEIS Research Paper 139, Tor Vergata University, CEIS, revised 19 Dec 2008. [Downloadable!]
    Other versions:
  2. Marco Francesconi & Abhinay Muthoo, 2006. "Control Rights in Public-Private Partnerships," IZA Discussion Papers 2143, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Jaideep Roy & Prabal Roy Chowdhury, 2008. "Public-private partnerships in microfinance: Should NGO involvement be restricted?," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-11, Indian Statistical Institute, New Delhi, India. [Downloadable!]
    Other versions:
  4. Eric Maskin & Jean Tirole, 2006. "Public-private Partnerships and Government Spending Limits," Economics Working Papers 0075, Institute for Advanced Study, School of Social Science. [Downloadable!]
    Other versions:
  5. Elisabetta Iossa & David Martimort, 2009. "The Theory of Incentives Applied to the Transport Sector," The Centre for Market and Public Organisation 09/210, Department of Economics, University of Bristol, UK. [Downloadable!]
    Other versions:
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