Innovation and Tariff-adjustment Options in Public-private Partnerships

Carlos Contreras () and Julio Angulo ()
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Carlos Contreras: Universidad Complutense de Madrid (en excedencia)
Julio Angulo: Independiente

Hacienda Pública Española / Review of Public Economics, 2022, vol. 243, issue 4, 51-81

Abstract: This paper explores the question of whether the inclusion in PPP contracts of options to adjust economic conditions in the face of technological changes may help the adoption of such innovations, while reducing the opportunity cost for governments. In the model proposed a grantor government reserves the right to cut its payments to the concessionaire when the concession’s costs are reduced because of the implementation of technological innovations The paper is of interest given that digital transformation and robotization can generate relevant productivity improvements in areas where a significant part of the public budget is spent, such as healthcare and education services. By adopting a numerical example, this paper illustrates the application of the model to a school concession project.

Keywords: Innovation; Public-private Partnerships; Real options; Operating costs. (search for similar items in EconPapers)
JEL-codes: D86 H11 H52 H57 (search for similar items in EconPapers)
Date: 2022
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