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How expensive are cost savings? On the economics of public-private partnerships

  • Valila, Timo


    (European Investment Bank, Economic and Financial Studies)

Public-private partnerships have emerged as an alternative to traditional public procurement in financing and providing infrastructure services. This paper considers public-private partnerships as another form of public sector intervention in the economy. It analyses the microeconomic pros and cons of publicprivate partnerships by identifying the sources of both higher benefits and higher costs associated with them, as compared to traditional public investment. Such analysis allows the outlining of the conditions under which public-private partnerships may be the optimal form of public sector intervention. In addition, the paper considers public-private partnerships from a macroeconomic perspective, focussing on their impact on fiscal policy and aggregate growth.

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Paper provided by European Investment Bank, Economics Department in its series EIB Papers with number 4/2005.

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Length: 26 pages
Date of creation: 06 Jun 2005
Date of revision:
Handle: RePEc:ris:eibpap:2005_004
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  1. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
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  5. Jens Lundsgaard, 2002. "Competition and Efficiency in Publicly Funded Services," OECD Economic Studies, OECD Publishing, vol. 2002(2), pages 79-128.
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  7. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," NBER Working Papers 5744, National Bureau of Economic Research, Inc.
  8. M.G. Pollitt, 2000. "The Declining Role of the State in Infrastructure Investments in the UK," Cambridge Working Papers in Economics 0001, Faculty of Economics, University of Cambridge.
  9. Blanchard, Olivier J & Giavazzi, Francesco, 2004. "Improving the SGP Through a Proper Accounting of Public Investment," CEPR Discussion Papers 4220, C.E.P.R. Discussion Papers.
  10. Brealey, R A & Cooper, I A & Habib, M A, 1997. "Investment Appraisal in the Public Sector," Oxford Review of Economic Policy, Oxford University Press, vol. 13(4), pages 12-28, Winter.
  11. 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.
  12. Domberger, Simon & Jensen, Paul, 1997. "Contracting Out by the Public Sector: Theory, Evidence, Prospects," Oxford Review of Economic Policy, Oxford University Press, vol. 13(4), pages 67-78, Winter.
  13. Jens Lundsgaard, 2002. "Competition and Efficiency in Publicly Funded Services," OECD Economics Department Working Papers 331, OECD Publishing.
  14. Brian Donaghue, 2002. "Statistical Treatment of 'Build-Own-Operate-Transfer+L2306 Schemes," IMF Working Papers 02/167, International Monetary Fund.
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