Public-private partnerships (PPPs) cannot be justified because they free public funds. When PPPs are justified on efficiency grounds, the contract that optimally balances demand risk, user-fee distortions and the opportunity cost of public funds, features a minimum revenue guarantee and a revenue cap. However, observed revenue guarantees and revenue sharing arrangements differ from those suggested by the optimal contract. Also, this contract can be implemented via a competitive auction with realistic informational requirements. Finally, the allocation of risk under the optimal contract suggests that PPPs are closer to public provision than to privatization.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
13284.
Length: Date of creation: Jul 2007 Date of revision: Handle: RePEc:nbr:nberwo:13284
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Find related papers by JEL classification: H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation R42 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government and Private Investment Analysis
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