The economics of infrastructure finance: Public-Private Partnerships versus public provision
AbstractWe examine the economics of infrastructure finance, focusing on public provision and Public-Private Partnerships (PPPs). We show that project finance is appropriate for PPP projects, because there are few economies of scope and because assets are project specific. Furthermore, we suggest that the higher cost of finance of PPPs is not an argument in favour of public provision, since it appears to reflect the combination of deficient contract design and the cost-cutting incentives embedded in PPPs. Thus, in the case of a correctly designed PPP contract, the higher cost of capital may be the price to pay for the efficiency advantages of PPPs. We also examine the role of government activities in PPP financing (e.g. revenue guarantees, renegotiations) and their consequences. Finally, we discuss how to include PPPs revenue guarantees and the results of PPP contract negotiation in the government balance sheet.
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 European Investment Bank, Economics Department in its series EIB Papers with number 2/2010.
Length: 30 pages
Date of creation: 17 Dec 2010
Date of revision:
Contact details of provider:
Postal: 100, boulevard Konrad Adenauer, L-2950 Luxembourg
Phone: (+352) 43 79 1
Fax: (+352) 43 79 68 895
Web page: http://www.eib.org/efs/
More information through EDIRC
Fiscal accounting; PPP premium; Project finance; Renegotiations; Revenue guarantees; Special Purpose Vehicule;
Other versions of this item:
- Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2010. "The economics of infrastructure finance: Public-private partnerships versus public provision," Documentos de Trabajo 276, Centro de Economía Aplicada, Universidad de Chile.
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-05 (All new papers)
- NEP-CFN-2011-02-05 (Corporate Finance)
- NEP-LAM-2011-02-05 (Central & South America)
- NEP-PPM-2011-02-05 (Project, Program & Portfolio Management)
- NEP-URE-2011-02-05 (Urban & Real Estate 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.:
- Fidrmuc, Jan, 2001. "Democracy in transition economies: Grease or sand in the wheels of growth?," ZEI Working Papers B 09-2001, ZEI - Center for European Integration Studies, University of Bonn.
- Ferreira, Luisa & Vanhoudt, Patrick, 2002. "Catching The Celtic Tiger By Its Tail," Economic and Financial Reports 2002/1, European Investment Bank, Economics Department.
- Douglas Sutherland & Sonia Araujo & Balázs Égert & Tomasz Kozluk, 2009. "Infrastructure Investment: Links to Growth and the Role of Public Policies," OECD Economics Department Working Papers 686, OECD Publishing.
- Valila, Timo & Mehrotra, Aaron, 2005. "Evolution And Determinants Of Public Investment In Europe," Economic and Financial Reports 2005/1, European Investment Bank, Economics Department.
- Hurst, Christopher & Uppenberg, Kristian, 2000. "Investment Issues In South-Eastern Europe," Economic and Financial Reports 2000/2, European Investment Bank, Economics Department.
- Rossi, Alessandro & Canpolongo, Francesca & Bichisao, Guido, 2002. "Hedge Accounting Within Ias 39," Economic and Financial Reports 2002/2, European Investment Bank, Economics Department.
- Lin, Justin Yifu, 2013. "Global infrastructure initiative and global recovery," Journal of Policy Modeling, Elsevier, vol. 35(3), pages 400-411.
- Luciano Greco, 2012. "Imperfect Bundling In Public-Private Partnerships," "Marco Fanno" Working Papers 0147, Dipartimento di Scienze Economiche "Marco Fanno".
- Pekka Leviakangas & Pekka Kess & Jaakko Kujala, 2013. "Investment Analysis in Public-Private-Partnership Projects: Any Common Ground for Public and Private Investors?," Diversity, Technology, and Innovation for Operational Competitiveness: Proceedings of the 2013 International Conference on Technology Innovation and Industrial Management, ToKnowPress.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Schumacher).
If references are entirely missing, you can add them using this form.