Financing Infrastructure in the Shadow of Expropriation

Viral Acharya, Cecilia Parlatore and Suresh Sundaresan

No 15288, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine the optimal financing of infrastructure when governments have limited financial commitment and can expropriate rents from private sector firms that manage infrastructure. While private firms need incentives to implement projects well, governments need incentives to limit expropriation. This double moral hazard limits the willingness of outside investors to fund infrastructure projects. Optimal financing involves government guarantees to investors against project failure to incentivize the government to commit not to expropriate which improves private sector incentives and project quality. The model captures several other features prevalent in infrastructure financing such as government co-investment, tax subsidies, development rights, and cross-guarantees.

Keywords: Double moral hazard; Public private partnerships; Government guarantees; Development rights; General obligation bonds; Revenue only bonds (search for similar items in EconPapers)
JEL-codes: D82 G30 G32 G38 H20 H41 H54 (search for similar items in EconPapers)
Date: 2022-06
New Economics Papers: this item is included in nep-cwa and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP15288 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Financing Infrastructure in the Shadow of Expropriation (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:15288

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP15288

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().