Financing the economy in debt times: The crucial role of public–private partnerships

Yawovi Mawussé Isaac Amedanou

Research in Economics, 2023, vol. 77, issue 3, 295-309

Abstract: This paper aims to show that there is a great interest for countries to rely on Public–Private Partnerships (PPPs) as a tool for financing the economy, especially in times of debt. First, we conceptualize through game theory a better risk management between the public and private sectors in case of co-investment. Second, building on Iossa and Martimort (2009), we demonstrate that PPPs investments produce greater economic and social gains than pure public investments by providing incentives and transferring risks to the private sector. The implications of the model are diverse: financing the provision of public infrastructure through PPPs allows for sharing the associated risks, improves the quality and reduce the costs of the provision of public goods. The model has been empirically tested on 14 Sub-Saharan African countries over the period 1990–2017. The impact of PPP investments is significantly higher than that of pure public investments. The evidence also shows that the positive impact of PPP investments strengthens economic growth as the public debt grows to a point where there is no longer any significant pro growth impact.

Keywords: Public–private partnerships; Pure public investment; Cooperative game; Risk management; Economic growth; Public debt; Fiscal constraints (search for similar items in EconPapers)
JEL-codes: C71 G32 H54 H63 L33 O40 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:77:y:2023:i:3:p:295-309

DOI: 10.1016/j.rie.2023.05.003

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