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Financing Costs and the Efficiency of Public-Private Partnerships

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  • Avdiu, Besart
  • Weichenrieder, Alfons

Abstract

The paper compares provision of public infrastructure via public-private partnerships (PPPs) with provision under government management. Due to soft budget constraints of government management, PPPs exert more effort and therefore have a cost advantage. At the same time, hard budget constraints for PPPs introduce a bankruptcy risk and bankruptcy costs. Consequently, PPPs may be less efficient, although this does not result from PPPs’ higher interest costs.

Suggested Citation

  • Avdiu, Besart & Weichenrieder, Alfons, 2018. "Financing Costs and the Efficiency of Public-Private Partnerships," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181521, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc18:181521
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    References listed on IDEAS

    as
    1. 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 69-76, March.
    2. Elisabetta Iossa & David Martimort, 2012. "Risk allocation and the costs and benefits of public--private partnerships," RAND Journal of Economics, RAND Corporation, vol. 43(3), pages 442-474, September.
    3. Hoppe, Eva I. & Schmitz, Patrick W., 2010. "Public versus private ownership: Quantity contracts and the allocation of investment tasks," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 258-268, April.
    4. Eytan Sheshinski & Luis F. López-Calva, 2003. "Privatization and Its Benefits: Theory and Evidence," CESifo Economic Studies, CESifo, vol. 49(3), pages 429-459.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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