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How Much Vertical Integration? Contractual Choice and Public–Private Partnerships in the United States

Author

Listed:
  • Daniel Albalate

    (University of Barcelona)

  • Germà Bel

    (University of Barcelona)

  • R. Richard Geddes

    (Cornell University)

Abstract

Efficiency gains in public–private partnerships (PPP) derive from risk transfer and the bundling of different tasks. We study the factors that explain bundling in single contracts. We focus on the choice between integrating operational tasks alone or construction tasks alone, versus vertically integrating both operational and construction tasks. We analyze a new data set that includes 553 PPPs that were concluded in the United States. We find evidence that some financial variables play a role in bundling decisions. In addition, market size and the type of economic sectors involved, are also important drivers of contract choice and bundling decisions.

Suggested Citation

  • Daniel Albalate & Germà Bel & R. Richard Geddes, 2017. "How Much Vertical Integration? Contractual Choice and Public–Private Partnerships in the United States," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(1), pages 25-42, August.
    • Handle: RePEc:kap:revind:v:51:y:2017:i:1:d:10.1007_s11151-016-9540-1
    DOI: 10.1007/s11151-016-9540-1
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    References listed on IDEAS

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    2. Martimort, David & Pouyet, Jerome, 2008. "To build or not to build: Normative and positive theories of public-private partnerships," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 393-411, March.
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    Cited by:

    1. Daniel, Albalate & Germà, Bel & Albert, Gragera, 2019. "Politics, risk, and white elephants in infrastructure PPPs," Utilities Policy, Elsevier, vol. 58(C), pages 158-165.
    2. Mahavadi Dhanshyam & Samir K. Srivastava, 2021. "Governance structures for public infrastructure projects: Public–private management regimes, contractual forms and innovation," Construction Management and Economics, Taylor & Francis Journals, vol. 39(8), pages 652-668, August.
    3. Bel, Germà & Bel-Piñana, Paula & Rosell, Jordi, 2017. "Myopic PPPs: Risk allocation and hidden liabilities for taxpayers and users," Utilities Policy, Elsevier, vol. 48(C), pages 147-156.
    4. Daniel Albalate & Germà Bel & Albert Gragera, 2018. "“When politics and lobbyism combine to promote white elephants by using PPPs”," IREA Working Papers 201823, University of Barcelona, Research Institute of Applied Economics, revised Oct 2018.
    5. Ram Singh, 2018. "Public–private partnerships vs. traditional contracts for highways," Indian Economic Review, Springer, vol. 53(1), pages 29-63, December.

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    More about this item

    Keywords

    Privatization; Public–private partnerships; Contracting; Vertical integration;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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