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How expensive are cost savings? On the economics of public-private partnerships

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Author Info

  • Valila, Timo

    ()
    (European Investment Bank, Economic and Financial Studies)

Abstract

Public-private partnerships have emerged as an alternative to traditional public procurement in financing and providing infrastructure services. This paper considers public-private partnerships as another form of public sector intervention in the economy. It analyses the microeconomic pros and cons of publicprivate partnerships by identifying the sources of both higher benefits and higher costs associated with them, as compared to traditional public investment. Such analysis allows the outlining of the conditions under which public-private partnerships may be the optimal form of public sector intervention. In addition, the paper considers public-private partnerships from a macroeconomic perspective, focussing on their impact on fiscal policy and aggregate growth.

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Bibliographic Info

Paper provided by European Investment Bank, Economics Department in its series EIB Papers with number 4/2005.

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Length: 26 pages
Date of creation: 06 Jun 2005
Date of revision:
Handle: RePEc:ris:eibpap:2005_004

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Related research

Keywords: public-private partnerships; procurement; economic efficiency;

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References

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  1. Domberger, Simon & Jensen, Paul, 1997. "Contracting Out by the Public Sector: Theory, Evidence, Prospects," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 13(4), pages 67-78, Winter.
  2. Oliver Hart, 2002. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," The Centre for Market and Public Organisation, Department of Economics, University of Bristol, UK 02/061, Department of Economics, University of Bristol, UK.
  3. Jens Lundsgaard, 2002. "Competition and Efficiency in Publicly Funded Services," OECD Economics Department Working Papers 331, OECD Publishing.
  4. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(4), pages 691-719, August.
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  6. Olivier Debande, 2002. "Private Financing of Transport Infrastructure: An Assessment of the UK Experience," Journal of Transport Economics and Policy, London School of Economics and University of Bath, London School of Economics and University of Bath, vol. 36(3), pages 355-387, September.
  7. Paul A. Grout & Margaret Stevens, 2003. "The Assessment: Financing and Managing Public Services," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 19(2), pages 215-234, Summer.
  8. Brian Donaghue, 2002. "Statistical Treatment of 'Build-Own-Operate-Transfer+L2306 Schemes," IMF Working Papers 02/167, International Monetary Fund.
  9. Jens Lundsgaard, 2002. "Competition and Efficiency in Publicly Funded Services," OECD Economic Studies, OECD Publishing, OECD Publishing, vol. 2002(2), pages 79-128.
  10. Tim Jenkinson, 2003. "Private Finance," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 19(2), pages 323-334, Summer.
  11. Andrei Shleifer, 1998. "State versus Private Ownership," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 12(4), pages 133-150, Fall.
  12. M.G. Pollitt, 2000. "The Declining Role of the State in Infrastructure Investments in the UK," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0001, Faculty of Economics, University of Cambridge.
  13. Blanchard, Olivier J & Giavazzi, Francesco, 2004. "Improving the SGP Through a Proper Accounting of Public Investment," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4220, C.E.P.R. Discussion Papers.
  14. Brealey, R A & Cooper, I A & Habib, M A, 1997. "Investment Appraisal in the Public Sector," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 13(4), pages 12-28, Winter.
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Cited by:
  1. André De Palma & Luc Leruth & Guillaume Prunier, 2012. "Towards a Principal-Agent Based Typology of Risks in Public-Private Partnerships," Reflets et perspectives de la vie économique, De Boeck Université, De Boeck Université, vol. 0(2), pages 57-73.
  2. Byoun, Soku & Xu, Zhaoxia, 2014. "Contracts, governance, and country risk in project finance: Theory and evidence," Journal of Corporate Finance, Elsevier, Elsevier, vol. 26(C), pages 124-144.
  3. Jean Tirole, 2009. "Cognition and Incomplete Contracts," American Economic Review, American Economic Association, American Economic Association, vol. 99(1), pages 265-94, March.
  4. Ward Romp & Jakob de Haan, 2007. "Public Capital and Economic Growth: A Critical Survey," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 8(s1), pages 6-52, 04.
  5. Galilea, Patricia & Medda, Francesca, 2010. "Does the political and economic context influence the success of a transport project? An analysis of transport public-private partnerships," Research in Transportation Economics, Elsevier, Elsevier, vol. 30(1), pages 102-109.

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