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Building and Managing Facilities for Public Services

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  • John Bennett

    ()

  • Elisabetta Iossa

Abstract

We model public-private partnershios in building and managing facilities for the provision of public services. In particular,we analyze both the desirability of bundling the building and management operations, and the optimal allocation of ownership between the public sector and private firms. When a positive externality exists across stages of production, bundling is optimal;but unbundling may be preferred when the externality is negative.Whether public ownership is preferred to private ownership depends on the extent and sign of the externality, the market value of the facility and the effect of the firms' investments on social benefits. The main advantage of the public ownership is that it works as a commitment device for the government to share social benefits with the investor.

Suggested Citation

  • John Bennett & Elisabetta Iossa, 2002. "Building and Managing Facilities for Public Services," Economics and Finance Discussion Papers 02-08, Economics and Finance Section, School of Social Sciences, Brunel University.
    • Handle: RePEc:bru:bruedp:02-08
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    File URL: http://www.brunel.ac.uk/329/efwps/02-08.pdf
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    References listed on IDEAS

    as
    1. Raghuram G. Rajan & Luigi Zingales, 1998. "Power in a Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 387-432.
    2. 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.
    3. Klaus Schmidt, 1998. "Sequential Investments and Options to Own," CESifo Working Paper Series 160, CESifo Group Munich.
    4. Timothy Besley & Maitreesh Ghatak, 2001. "Government Versus Private Ownership of Public Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1343-1372.
    5. 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.
    6. 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.
    7. Patrick W. Schmitz, 2000. "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.
    8. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1127-1161.
    9. repec:hrv:faseco:30727607 is not listed on IDEAS
    10. Edlin, Aaron S & Hermalin, Benjamin E, 2000. "Contract Renegotiation and Options in Agency Problems," Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(2), pages 395-423, October.
    11. Bos, Dieter & De Fraja, Gianni, 2002. "Quality and outside capacity in the provision of health services," Journal of Public Economics, Elsevier, vol. 84(2), pages 199-218, May.
    12. repec:ohe:monogr:000470 is not listed on IDEAS
    13. Grout, Paul A, 1997. "The Economics of the Private Finance Initiative," Oxford Review of Economic Policy, Oxford University Press, vol. 13(4), pages 53-66, Winter.
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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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