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Building and managing facilities for public services

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  • Bennett, John
  • Iossa, Elisabetta

Abstract

We model alternative institutional arrangements for building and managing facilities for provision of public services, including the use of the Private Finance Initiative (PFI), by exploring the effects on innovative investment activity by providers. The desirability of bundling the building and management operations is analyzed, and it is considered whether it is optimal to allocate ownership to the public or the private sector. We also examine how the case for PFI is affected by the (voluntary or automatic) transfer of ownership from the private to the public sector when the contract expires. Asset specificity and service-demand risk play critical roles.
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Suggested Citation

  • Bennett, John & Iossa, Elisabetta, 2006. "Building and managing facilities for public services," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2143-2160, November.
  • Handle: RePEc:eee:pubeco:v:90:y:2006:i:10-11:p:2143-2160
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    1. Georg Noeldeke & Klaus Schmidt, 1998. "Sequential Investments and Options to Own," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 633-653, Winter.
    2. Bennett, John & Iossa, Elisabetta, 2006. "Building and managing facilities for public services," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2143-2160, November.
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    5. King, S. & Pitchford, R., 1998. "Private or Public? A Taxonomy of Optimal Ownership and Management Regimes," Department of Economics - Working Papers Series 625, The University of Melbourne.
    6. Raghuram G. Rajan & Luigi Zingales, 1998. "Power in a Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 387-432.
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    8. Stephen King & Rohan Pitchford, 2008. "Private or Public? Towards a Taxonomy of Optimal Ownership and Management Regimes," The Economic Record, The Economic Society of Australia, vol. 84(266), pages 366-377, September.
    9. Patrick W. Schmitz, 2001. "Partial Privatization and Incomplete Contracts: The Proper Scope of Government Reconsidered," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(4), pages 394-411, August.
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    11. Office of Health Economics, 2001. "The Economics of the Private Finance Initiative in the NHS," Monograph 000470, Office of Health Economics.
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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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