Optimal Public Procurement Contracts Under a Soft Budget Constraint
AbstractThis paper presents a model where the central government cannot ensure that regional governments manage risks prudentially, due to soft budget constraint. Competition for project funding induces the regional governments use financial instruments as commitment devices as a signal of prudential risk management. A Public-Private Partnership contract, which delegates the monitoring task to a financial institute, is the most efficient commitment device provided that private financiers have an access to the same monitoring technology the regional governments fail to employ. The optimal capital structure of a PPP contract is a combination of public funds and debt from financial institutes. JEL Classification: D8, L3, H54, H57
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 464.
Date of creation: 31 Dec 2008
Date of revision:
Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-07 (All new papers)
- NEP-CTA-2009-02-07 (Contract Theory & Applications)
- NEP-PBE-2009-02-07 (Public Economics)
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.:
- Mathias Dewatripont & Eric Maskin, 1995.
"Credit and efficiency in centralized and decentralized economies,"
ULB Institutional Repository
2013/9603, ULB -- Universite Libre de Bruxelles.
- Dewatripont, M & Maskin, E, 1995. "Credit and Efficiency in Centralized and Decentralized Economies," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 541-55, October.
- Mathias Dewatripont & Eric Maskin, 2004. "Credit and efficiency in centralized and decentralized economies," ULB Institutional Repository 2013/9605, ULB -- Universite Libre de Bruxelles.
- Yuk-Shee Chan & Anjan V. Thakor, 2004.
"Collateral and Competitive Equilibria with Moral Hazard and Private Information,"
- Chan, Yuk-Shee & Thakor, Anjan V, 1987. " Collateral and Competitive Equilibria with Moral Hazard and Private Information," Journal of Finance, American Finance Association, vol. 42(2), pages 345-63, June.
- Maskin, Eric & Tirole, Jean, 2006.
"Public-Private Partnerships and Government Spending Limits,"
IDEI Working Papers
439, Institut d'Économie Industrielle (IDEI), Toulouse.
- Maskin, Eric & Tirole, Jean, 2008. "Public-private partnerships and government spending limits," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 412-420, March.
- Maskin, Eric & Tirole, Jean, 2008. "Public-Private Partnerships and Government Spending Limits," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Eric Maskin & Jean Tirole, 2006. "Public-private Partnerships and Government Spending Limits," Economics Working Papers 0075, Institute for Advanced Study, School of Social Science.
- Arrow, Kenneth J & Lind, Robert C, 1970. "Uncertainty and the Evaluation of Public Investment Decisions," American Economic Review, American Economic Association, vol. 60(3), pages 364-78, June.
- Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996.
"The Proper Scope of Government: Theory and an Application to Prisons,"
NBER Working Papers
5744, National Bureau of Economic Research, Inc.
- Hart, Oliver & Shleifer, Andrei & Vishny, Robert W, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1127-61, November.
- Oliver Hart & Andrei Shleifer & Robert Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," Harvard Institute of Economic Research Working Papers 1778, Harvard - Institute of Economic Research.
- Qian, Yingyi & Roland, Gerard, 1998.
"Federalism and the Soft Budget Constraint,"
American Economic Review,
American Economic Association, vol. 88(5), pages 1143-62, December.
- Oliver E. Williamson, 1967. "Hierarchical Control and Optimum Firm Size," Journal of Political Economy, University of Chicago Press, vol. 75, pages 123.
- Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anita Niskanen).
If references are entirely missing, you can add them using this form.