A Theory of Social Impact Bonds

Daniel Tortorice, David E. Bloom (), Paige Kirby () and John Regan ()
Additional contact information
David E. Bloom: Harvard School of Public Health
Paige Kirby: Data for Decisions LCC
John Regan: Data for Decisions LCC

No 13431, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Social impact bonds (SIBs) are an innovative financing mechanism for public goods. In a SIB, an investor provides capital to a service provider for a social intervention. The investor receives a return based on the outcome of the intervention relative to a predetermined benchmark. We describe the basic structure of a SIB and provide some descriptive statistics for these financial instruments. We then consider a formal model of SIBs and examine their ability to finance positive net present value projects that traditional debt finance cannot. We find that SIBs expand the set of implementable projects if governments are pessimistic (relative to the private sector) about the probability an intervention would succeed or if the government is particularly averse to paying costs associated with a project that does not generate offsetting benefits. As both these features are present in various public programs, we conclude that SIBs are a real innovation in public finance and should be considered for projects when traditional debt finance has been rejected.

Keywords: fixed income securities; public services; impact investing; social impact bonds (search for similar items in EconPapers)
JEL-codes: G12 H41 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2020-06
New Economics Papers: this item is included in nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://docs.iza.org/dp13431.pdf (application/pdf)

Related works:
Working Paper: A Theory of Social Impact Bonds (2022)
Working Paper: A Theory of Social Impact Bonds (2020)
Working Paper: A Theory of Social Impact Bonds (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp13431

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().