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Governing Public-Private Partnerships: The Problem of Low-Cost Decisions

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  • Mause, Karsten

Abstract

In many cases, the expected efficiency advantages of public-private partnership (PPP) projects as a specific form of infrastructure provision did not materialize ex post. From a Public Choice perspective, one simple explanation for many of the problems surrounding the governance of PPPs is that the public decision-makers being involved in the process of initiating and implementing PPP projects (namely, politicians and public bureaucrats) in many situations make low-cost decisions in the sense of Kirchgässner. That is, their decisions may have a high impact on the wealth of the jurisdiction in which the PPP is located (most notably, on the welfare of citizen-taxpayers in this jurisdiction) but, at the same time, these decisions often only have a low impact on the private welfare of the individual decision-makers in politics and bureaucracies. The latter, for example, in many settings often have a low economic incentive to monitor/control what the private sector partners are doing (or not doing) within a PPP arrangement. The purpose of this paper is to draw greater attention to the problems created by low-cost decisions for the governance of PPPs. Moreover, the paper discusses potential remedies arising from the viewpoint of Public Choice and constitutional political economy.

Suggested Citation

  • Mause, Karsten, 2019. "Governing Public-Private Partnerships: The Problem of Low-Cost Decisions," EconStor Preprints 209582, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:209582
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    More about this item

    Keywords

    Public-Private Partnerships; PPPs; Efficiency; Public Choice; Government Failure; Governance;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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