Institutional Economics and the Cost of Capital for Infrastructure Projects

R. Richard Geddes and Joshua Goldman

Journal of Economic Policy Reform, 2022, vol. 25, issue 2, 85-102

Abstract: The growing use of public-private partnerships (PPPs) in infrastructure delivery has rekindled the public versus private cost-of-capital debate. Early debate concluded that the social cost of public-sector capital is below that of private capital because risk can be spread across numerous taxpayers. Intervening research focused on the agency costs that arise due to increased separation between equity holders and managers and the various mechanisms to control those agency costs. We analyze differences in public versus private residual claims and their associated agency costs. We conclude that earlier discussions that omitted agency-cost analysis should be revisited.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:taf:jpolrf:v:25:y:2022:i:2:p:85-102

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DOI: 10.1080/17487870.2020.1768856

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