'Build It or Not': Normative and Positive Theories of Public-Private Partnerships

David Martimort and Jerome Pouyet

No 5610, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper analyzes whether the two tasks of building infrastructures which are socially useful and managing those assets should be bundled or not. When performances contracts can be written, both tasks should be performed altogether by the same firm when a better design of the infrastructure helps also to save on operating costs (positive externality). Otherwise (negative externality), tasks should be kept split apart and undertaken by different units. In incomplete contracting environments where the quality of the infrastructure may be hard to describe in advance, we isolate conditions under which either the traditional form of public provision of services or the more fashionable public-private partnership optimally emerges. The latter dominates when there is a positive externality but the private benefits from owning assets are small enough. Finally, we take a political economy perspective and study how incentive schemes are modified under the threat of capture of the decision-makers.

Keywords: Public-private partnership; Bundling/unbundling; Agency costs; Capture (search for similar items in EconPapers)
JEL-codes: H11 (search for similar items in EconPapers)
Date: 2006-04
New Economics Papers: this item is included in nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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