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Do public-private partnership enabling laws increase private investment in infrastructure?

Daniel Albalate (), Germà Bel () and R. Richard Geddes ()
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Daniel Albalate: Department of Econometrics, Statistics and Applied Economics & GiM-IREA University of Barcelona. C/ John Keynes 1-11, 08034 Barcelona. Tel: 34.93.4031131 Fax:34.93.4024573
R. Richard Geddes: Department of Policy Analysis and Management. Cornell University 251 Martha Van Rensselaer Hall. Ithaca, NY 14853. Phone: (607) 255-8391.

No 201815, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: Rising use of public-private partnerships, or PPPs, is an important development in U.S. infrastructure delivery. PPPs are detailed contracts between a public-sector infrastructure project sponsor and a private-sector provider that bundle delivery services. PPPs represent a middle ground between pure-public project delivery and complete privatization. As of 2016, thirty-five U.S. states had enacted PPP enabling laws. That legislation defines the broad institutional framework surrounding a PPP agreement. It addresses such questions as the mixing of public- and private-sector funds, the treatment of unsolicited PPP proposals, and need for prior legislative approval of PPP contracts, among other key issues. We provide the first thorough empirical assessment of the impact of PPP enabling laws on a state’s utilization of private investment. We analyze the overall effect of having a PPP enabling law while controlling for a variety of factors, including the state’s indebtedness, its broad political disposition, union membership, per-capita income, and other variables. We then assess the impact of thirteen individual PPP enabling-law provisions. We develop an expertinformed weighted index reflecting the degree to which a state’s law is encouraging or discouraging of private investment. We find that more favorable PPP enabling laws increase private investment: when our favorability index increases by one-tenth, the proportion of infrastructure investment delivered via PPP in a state increases by 0.5-0.6. We find that PPP enabling-law provisions allowing unsolicited proposals and the comingling of public and private funds are particularly important in attracting private investment.

Keywords: Transportation infrastructure; public-private partnerships; private investment; state public-private partnership enabling laws; fiscal constraints. JEL classification:L14; L33; L51; L92; L98. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ppm and nep-tre
Date: 2018-07, Revised 2018-07
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