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Building and Managing Facilities for Public Services

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  • John Bennett

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  • 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.

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Paper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 02-08.

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Length: 33 pages
Date of creation: Apr 2002
Date of revision:
Handle: RePEc:bru:bruedp:02-08
Contact details of provider: Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK

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Find related papers by 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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  1. Timothy Besley & Maitreesh Ghatak, 2001. "Government Versus Private Ownership Of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1343-1372, November.
  2. Oliver Hart, 2003. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," Economic Journal, Royal Economic Society, vol. 113(486), pages C69-C76, March.
  3. Nöldeke, Georg & Schmidt, Klaus M., 1998. "Sequential investments and options to own," Munich Reprints in Economics 19327, University of Munich, Department of Economics.
  4. Raghuram G. Rajan & Luigi Zingales, 1998. "Power In A Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 387-432, May.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. Hart, Oliver & Shleifer, Andrei & Vishny, Robert W, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1127-61, November.
  10. 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.
  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.
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