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Optimal Provision of Infrastructure using Public-Private Partnership Contracts

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Author Info
Gerard van der Laan () (Vrije Universiteit Amsterdam)
Pieter Ruys
Dolf Talman (Tilburg University)

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Abstract

This paper deals with the optimal provision of infrastructure by means of public-private partnership contracts. In the economic literature infrastructure is characterized as a large, indivisible and non-rival capital good that produces services for its users. The non-rivalness or nonexcludability of the infrastructure and the large costs of infrastructure causes it to be a public good. On the other hand, infrastructure possesses characteristics of a private commodity because it facilitates of the use of a complementary private commodity. Modern monitoring techniques open new possibilities to reveal the need of individual users for infrastructure. Consequently, a large part of the public financing of infrastructure can be privatised. In this paper we discuss the design of an operational system to finance the costs of infrastructure. It will be shown that the system basically can result in an economically efficient level of infrastructure. The basic idea is that use of infrastructure is constrained by the availability of the infrastructure being provided. Therefore users who are hampered by too small a provision of the infrastructure are willing to pay for the use of infrastructure.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-011/1.

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Date of creation: 26 Jan 2001
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Handle: RePEc:dgr:uvatin:20010011

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  1. Ruys, P.H.M. & Laan, G. van der, 1987. "Computation of an industrial equilibrium," Serie Research Memoranda 0026, Free University Amsterdam, Faculty of Economics, Business Administration and Econometrics. [Downloadable!]
  2. Hammond, Peter J & Villar, Antonio, 1998. " Efficiency with Non-convexities: Extending the "Scandinavian Consensus" Approaches," Scandinavian Journal of Economics, Blackwell Publishing, vol. 100(1), pages 11-32, March. [Downloadable!] (restricted)
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  3. Bryan Ellickson & Birgit Grodal & Suzanne Scotchmer & William R. Zame, 1999. "Clubs and the Market," Econometrica, Econometric Society, vol. 67(5), pages 1185-1218, September.
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  4. Ellingsen, Tore, 1998. "Externalities vs internalities: a model of political integration," Journal of Public Economics, Elsevier, vol. 68(2), pages 251-268, May. [Downloadable!] (restricted)
  5. Cornielje, O. J. C. & Van Der Laan, G., 1986. "The computation of quantity-constrained equilibria by virtual taxes," Economics Letters, Elsevier, vol. 22(1), pages 1-6. [Downloadable!] (restricted)
  6. Cornet, Bernard, 1988. "General equilibrium theory and increasing returns : Presentation," Journal of Mathematical Economics, Elsevier, vol. 17(2-3), pages 103-118, April. [Downloadable!] (restricted)
  7. Mas-Colell, Andreu, 1980. "Efficiency and Decentralization in the Pure Theory of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 625-41, June. [Downloadable!] (restricted)
  8. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January. [Downloadable!] (restricted)
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