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

Karsten Mause

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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.

Keywords: Public-Private Partnerships; PPPs; Efficiency; Public Choice; Government Failure; Governance (search for similar items in EconPapers)
JEL-codes: D72 D73 H10 H54 H57 H82 K00 L32 L33 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Governing Public-Private Partnerships: The Problem of Low-Cost Decisions (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:209582

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