 Public-private partnerships and government spending limitsInternational Journal of Industrial Organization, 2008, vol. 26, issue 2, 412-420 Abstract: We consider public-private partnerships, in which a public official selects a project that is then developed and operated by a private contractor. We derive optimal public accounting rules when the official's choice among projects is biased by ideology or social ties or because of pandering to special interests. We give particular emphasis to how the rules should constrain the official's incentive to understate the costs of her pet projects. In the basic model, we show that the optimal accounting rule takes the form of a budget cap, with a project's expected cost modified to reflect the official's distortionary incentives. If the project can be partially financed privately, then "fixed-price" contracts can serve to curb political misbehavior by "securitizing" public sector liabilities. We also consider the possibility that development and operations are each handled by different contractors. Such "unbundling" deprives public accountants of forward information about future costs, but can prevent the official from funneling hidden future rents to contractors. Date: 2008 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:26:y:2008:i:2:p:412-420 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.