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Recovery Risk and Labor Costs in Public-Private-Partnerships: Contractual Choice in the U.S. Water industry

Daniel Albalate (), Germà Bel () and R. Richard Geddes ()
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R. Richard Geddes: Department of Policy Analysis & Management, College of Human Ecology, Cornell University

No 201222, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: We use an ordered logistic model to empirically examine the factors that explain varying degrees of private involvement in the U.S. water sector through public-private partnerships. Our estimates suggest that a variety of factors help explain greater private participation in this sector. We find that the risk to private participants regarding cost recovery is an important driver of private participation. The relative cost of labor is also a key factor in determining the degree of private involvement in the contract choice. When public wages are high relative to private wages, private participation is viewed as a source of cost savings. We thus find two main drivers of greater private involvement: one encouraging private participation by reducing risk, and another encouraging government to seek out private participation in lowering costs.

Keywords: Privatization, Public-Private Partnerships, Water, Contracting out. JEL classification: H4; H54; H7; L88; L9 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2012-12, Revised 2012-12
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Persistent link: https://EconPapers.repec.org/RePEc:ira:wpaper:201222

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