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The use of PPP's and the profitability rate paradox

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  • Bonnafous, Alain

Abstract

Over the past twenty years growth in the use of PPPs for new infrastructures has signalled a significant change which completely redefines the issues of public economics in the field of transport policy. This paper concerns the optimal casting between public sphere and private operators. The analysis is based on relationships linking for each project the subsidy rate, the internal rate of return (IRR) and the additional IRR provided to the operator by subsidies. The need for subsidy appears as an increasing function of this additional IRR. Nevertheless, the gradient of the curve decreases in a marked manner. This concavity has some policy oriented consequences.

Suggested Citation

  • Bonnafous, Alain, 2012. "The use of PPP's and the profitability rate paradox," Research in Transportation Economics, Elsevier, vol. 36(1), pages 45-49.
    • Handle: RePEc:eee:retrec:v:36:y:2012:i:1:p:45-49
    DOI: 10.1016/j.retrec.2012.03.005
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    References listed on IDEAS

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    1. Bonnafous, Alain, 2010. "Programming, optimal pricing and partnership contract for infrastructures in PPPs," Research in Transportation Economics, Elsevier, vol. 30(1), pages 15-22.
    2. Paul H. Malatesta & Kathryn L. DeWenter, 2001. "State-Owned and Privately Owned Firms: An Empirical Analysis of Profitability, Leverage, and Labor Intensity," American Economic Review, American Economic Association, vol. 91(1), pages 320-334, March.
    3. Alain Bonnafous & Pablo Jensen, 2005. "Ranking Transport Projects by their Socioeconomic Value or Financial Interest rate of return?," Post-Print halshs-00079721, HAL.
    4. Alain Bonnafous, 2002. "Les infrastructures de transport et la logique financière du partenariat public-privé : quelques paradoxes," Revue Française d'Économie, Programme National Persée, vol. 17(1), pages 173-194.
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    Cited by:

    1. Francesco Parola & Jasmine Siu Lee Lam, 2018. "An empirical investigation of logistics infrastructure projects in emerging economies," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 20(1), pages 48-71, March.

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    More about this item

    Keywords

    Public investment; Subsidy; Public–private partnership;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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