Public-private partnership in energy investment and inclusive growth

Public–Private Partnerships is an important tool for infrastructure development in emerging economies, offering the possibility of driving both economic growth and climate resilience. However, with the increased consciousness of the role of PPPs, the understanding of how PPP investments in energy are contributing to inclusive development, through a conduit of gross fixed capital formation (GFCF) and institutional quality, is still limited. Most existing empirical literature does not consider how these factors together impact the social outcomes of interest, especially to income inequality, poverty, and unemployment, the social dimensions of the 2030 Sustainable Development Goals (SDGs). This study analyses these relationships in a sample of 23 emerging economies from 1995 to 2023 by employing System Generalized Method of Moments, DKSE, and FGLS estimators. The findings of the study observe that a 1 % increase in PPP investment is associated with a 0.70 % decrease in income inequality and 0.16 % and 0.17 % increases in poverty and unemployment, respectively. In contrast, GFCF and institutional quality are associated with adverse impacts on inclusive development indicators. These findings emphasize the lack of social inclusivity of the current patterns of investment. Overall, this suggests that inclusive and climate-resilient growth will only occur when there is an improvement in institutional capacity and investments are made in productive and low-emission social sectors. The study generates a contribution to policy conversations on the balance between efficiency and equity by influencing reforms concerning the governance of, and design of, PPP investment towards SDG 1, SDG 8, SDG 10, and SDG 13.