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How (Not) to Foster Innovations in Public Infrastructure Projects

Eva Hoppe and Patrick Schmitz

Scandinavian Journal of Economics, 2021, vol. 123, issue 1, 238-266

Abstract: The government wants an infrastructure‐based public service to be provided. First, the infrastructure has to be built; subsequently, it has to be operated. Should the government bundle the building and operating tasks in a public–private partnership? Or should it choose traditional procurement (i.e., delegate the tasks to different firms)? Each task entails unobservable investments to come up with innovations. It turns out that, depending on the nature of the innovations, bundling can either stimulate or discourage investments. Moreover, we find that if renegotiation cannot be prevented, public–private partnerships might lead the government to deliberately opt for technologically inferior projects.

Date: 2021
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https://doi.org/10.1111/sjoe.12393

Related works:
Working Paper: How (Not) to Foster Innovations in Public Infrastructure Projects (2019) Downloads
Working Paper: How (Not) to Foster Innovations in Public Infrastructure Projects (2018) Downloads
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Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

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