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Is the PPP model applicable across sectors?

Author

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  • Riess, Armin

    () (European Investment Bank, Economic and Financial Studies)

Abstract

Focussing on two key features of a PPP - the bundling of construction and operation of an infrastructure asset, for one, and private ownership for another - this paper argues that the PPP model is suitable for some public services but not for others. While the incentive-oriented mechanism of bundling and private ownership fosters cost savings in the provision of public services, such savings might come at the expense of public-interest objectives, which - after all - set public services apart from private goods and services. The challenge then is to find out whether the conditions for cost savings to outweigh departures from public-interest objectives are more likely to exist for some services than for others. This paper answers affirmatively, putting the ease (or difficulty) of contracting on public services - notably their publicinterest objectives - at the heart of the argument.

Suggested Citation

  • Riess, Armin, 2005. "Is the PPP model applicable across sectors?," EIB Papers 6/2005, European Investment Bank, Economics Department.
  • Handle: RePEc:ris:eibpap:2005_006
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    References listed on IDEAS

    as
    1. 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.
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    Cited by:

    1. Leviäkangas, Pekka & Ojala, Lauri & Töyli, Juuso, 2016. "An integrated ecosystem model for understanding infrastructure PPPs," Utilities Policy, Elsevier, vol. 42(C), pages 10-19.
    2. Blanc-Brude, Frederic & Goldsmith, Hugh & Valila, Timo, 2007. "Ex Ante Construction Costs In The European Road Sector: A Comparison Of Public-Private Partnerships And Traditional Public Procurement," Economic and Financial Reports 2006/1, European Investment Bank, Economics Department.
    3. Lauri Koskela & John Rooke & Mohan Siriwardena, 2016. "Evaluation of the Promotion of Through-Life Management in Public Private Partnerships for Infrastructure," Sustainability, MDPI, Open Access Journal, vol. 8(6), pages 1-23, June.
    4. Frédéric Blanc-Brude & Hugh Goldsmith & Timo Välilä, 2009. "A Comparison of Construction Contract Prices for Traditionally Procured Roads and Public–Private Partnerships," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(1), pages 19-40, September.
    5. Efraim Sadka, 2006. "Public-Private Partnerships; A Public Economics Perspective," IMF Working Papers 06/77, International Monetary Fund.

    More about this item

    Keywords

    public-private partnerships; economic sectors; incomplete contracts; ownership;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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