Official Tenure, Fiscal Capacity, and PPP Withdrawal of Local Governments: Evidence from China’s PPP Project Platform

Yingying Wang, Wenjuan Song, Bo Zhang and Robert L. K. Tiong
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Yingying Wang: School of Public Policy and Management, Tsinghua University, Beijing 100084, China
Wenjuan Song: School of Public Policy and Management, Tsinghua University, Beijing 100084, China
Bo Zhang: Hang Lung Center for Real Estate, Department of Construction Management, Tsinghua University, Beijing 100084, China
Robert L. K. Tiong: School of Civil and Environmental Engineering, Nanyang Technological University, Singapore 639798, Singapore

Sustainability, 2021, vol. 13, issue 24, 1-16

Abstract: PPP withdrawal policy is helpful to reduce over-investment in PPPs leading to sustainable development. However, little is known about the role of local governments on over-investment in PPPs. Using the PPP Project Platform Data, a unique dataset, this article is able to quantify over-investment in PPPs by coding PPP withdrawal for the first time. This research tests the influencing factors of PPP withdrawal at the municipal level, according to the centralized withdrawal policy in late 2017 as an exogenous treatment. Based on the theory of over-investment to rapid economic growth, this study develops a two-pillar framework under the combination of political man and economic man assumptions to explain the PPP withdrawal of local governments. The results show that both official tenure and fiscal capacity are significant factors. In addition, debt partially mediates the mayor tenure on PPP withdrawal, and the land revenue growth can hinder the negative relationship between mayor tenure and PPP withdrawal. It implies that over-investment in PPPs is strongly influenced by official leaders’ personal promotion incentive and official group members’ collective benefit. Thus, our findings indicate that the centralized withdrawal policy is an effective instrument to prevent over-investment in PPPs. Moreover, a match should be formed between local development planning and investment plans to promote sustainable of PPP investment.

Keywords: PPP withdrawal; PPP Project Platform (PPP-PP); over-investment; official tenure; fiscal capacity (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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