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Privatizing Highways in the United States

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Author Info
Eduardo Engel
Ronald Fischer ()
Alexander Galetovic

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Abstract

Major increases in congestion over the last two decades, combined with troubled government finances, have made private toll-roads increasingly attractive in the United States. Road privatization consists in having a private firm build, operate and maintain the road for many decades. The main (often only) source of income for the franchise holder is toll revenue. We review the experience of both private toll-roads built in the United States during the 1990s, and argue that the problems they encountered could have been avoided if the length of the franchise contract had adapted to demand realizations. We also argue in favor of adjudicating private toll-roads in competitive (Demsetz) auctions. Both advantages are attained if the highway is auctioned to the firm that bids the least present value of toll revenue (PVR), an approach we discuss in detail throughout the paper.

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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 209.

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Date of creation: 2005
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Handle: RePEc:edj:ceauch:209

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This paper has been announced in the following NEP Reports: 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.:
  1. Clifford Winston, 2000. "Government Failure in Urban Transportation," Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 403-425, December. [Downloadable!]
  2. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stephane, 2003. "Renegotiation of concession contracts in Latin America," Policy Research Working Paper Series 3011, The World Bank. [Downloadable!]
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  3. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 1998. "Infraestructure Franchising and Government Guarantees," Documentos de Trabajo 29, Centro de Economía Aplicada, Universidad de Chile.
  4. Eduardo M. R. A. Engel & Ronald D. Fischer & Alexander Galetovic, 2001. "Least-Present-Value-of-Revenue Auctions and Highway Franchising," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 993-1020, October. [Downloadable!] (restricted)
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(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. Athias, Laure & Saussier, Stéphane, 2007. "Contractual flexibility or rigidity for public private partnerships? Theory and evidence from infrastructure concession contracts," MPRA Paper 10541, University Library of Munich, Germany. [Downloadable!]
  2. Jean-Michel Glachant & Stéphane Saussier, 2006. "Introduction," Review of Industrial Organization, Springer, vol. 29(1), pages 1-2, September. [Downloadable!] (restricted)
  3. Athias, Laure & Nunez, Antonio, 2008. "The more the merrier? Number of bidders, information dispersion, renegotiation and winner’s curse in toll road concessions," MPRA Paper 10539, University Library of Munich, Germany. [Downloadable!]
  4. Clifford Winston & Jia Yan, 2008. "US Highway Privatization and Heterogeneous Preferences," Working Papers 2008-20, School of Economic Sciences, Washington State University. [Downloadable!]
  5. Athias, Laure, 2007. "Political accountability, incentives, and Contractual design of public private partnerships," MPRA Paper 10538, University Library of Munich, Germany, revised 11 Mar 2009. [Downloadable!]
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