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Official Tenure, Fiscal Capacity, and PPP Withdrawal of Local Governments: Evidence from China’s PPP Project Platform

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  • Yingying Wang

    (School of Public Policy and Management, Tsinghua University, Beijing 100084, China)

  • Wenjuan Song

    (School of Public Policy and Management, Tsinghua University, Beijing 100084, China)

  • Bo Zhang

    (Hang Lung Center for Real Estate, Department of Construction Management, Tsinghua University, Beijing 100084, China)

  • Robert L. K. Tiong

    (School of Civil and Environmental Engineering, Nanyang Technological University, Singapore 639798, Singapore)

Abstract

PPP withdrawal policy is helpful to reduce over-investment in PPPs leading to sustainable development. However, little is known about the role of local governments on over-investment in PPPs. Using the PPP Project Platform Data, a unique dataset, this article is able to quantify over-investment in PPPs by coding PPP withdrawal for the first time. This research tests the influencing factors of PPP withdrawal at the municipal level, according to the centralized withdrawal policy in late 2017 as an exogenous treatment. Based on the theory of over-investment to rapid economic growth, this study develops a two-pillar framework under the combination of political man and economic man assumptions to explain the PPP withdrawal of local governments. The results show that both official tenure and fiscal capacity are significant factors. In addition, debt partially mediates the mayor tenure on PPP withdrawal, and the land revenue growth can hinder the negative relationship between mayor tenure and PPP withdrawal. It implies that over-investment in PPPs is strongly influenced by official leaders’ personal promotion incentive and official group members’ collective benefit. Thus, our findings indicate that the centralized withdrawal policy is an effective instrument to prevent over-investment in PPPs. Moreover, a match should be formed between local development planning and investment plans to promote sustainable of PPP investment.

Suggested Citation

  • Yingying Wang & Wenjuan Song & Bo Zhang & Robert L. K. Tiong, 2021. "Official Tenure, Fiscal Capacity, and PPP Withdrawal of Local Governments: Evidence from China’s PPP Project Platform," Sustainability, MDPI, vol. 13(24), pages 1-16, December.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:24:p:14012-:d:705977
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    References listed on IDEAS

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    1. Zhuravskaya, Ekaterina V., 2000. "Incentives to provide local public goods: fiscal federalism, Russian style," Journal of Public Economics, Elsevier, vol. 76(3), pages 337-368, June.
    2. Zhang, Yanlong, 2015. "The formation of public-private partnerships in China: an institutional perspective," Journal of Public Policy, Cambridge University Press, vol. 35(2), pages 329-354, August.
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    Cited by:

    1. Fusheng Xie & Lei Hang, 2022. "A Game-Theory-Based Interaction Mechanism between Central and Local Governments on Financing Model Selection in China," Sustainability, MDPI, vol. 14(16), pages 1-18, August.

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