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Financing costs and the efficiency of public-private partnerships

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  • Avdiu, Besart
  • Weichenrieder, Alfons J.

Abstract

The paper compares provision of public infrastructure via public-private partnerships (PPPs) with provision under government management. Due to soft budget constraints of government management, PPPs exert more effort and therefore have a cost advantage in building infrastructure. At the same time, hard budget constraints for PPPs introduce a bankruptcy risk and bankruptcy costs. Consequently, if bankruptcy costs are high, PPPs may be less efficient than public management, although this does not result from PPPs' higher interest costs.

Suggested Citation

  • Avdiu, Besart & Weichenrieder, Alfons J., 2020. "Financing costs and the efficiency of public-private partnerships," SAFE Working Paper Series 295, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:295
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    References listed on IDEAS

    as
    1. Oliver Hart, 2003. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," Economic Journal, Royal Economic Society, vol. 113(486), pages 69-76, March.
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    3. Hoppe, Eva I. & Schmitz, Patrick W., 2010. "Public versus private ownership: Quantity contracts and the allocation of investment tasks," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 258-268, April.
    4. Eytan Sheshinski & Luis F. López-Calva, 2003. "Privatization and Its Benefits: Theory and Evidence," CESifo Economic Studies, CESifo Group, vol. 49(3), pages 429-459.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Public-Private Partnerships; Infrastructure; Financing Costs; Default;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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