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Title:The basic public finance of public-private partnerships PDF Logo
Authors:Engel, Eduardo M. R. A.
Fischer, Ronald D.
Galetovic, Alexander
Issue Date:2007
Series/Report no.:Center discussion paper // Economic Growth Center 957
Abstract:Public-private partnerships (PPPs) cannot be justified because they free public funds. When PPPs are justified on efficiency grounds, the contract that optimally balances demand risk, user-fee distortions and the opportunity cost of public funds, features a minimum revenue guarantee and a revenue cap. However, observed revenue guarantees and revenue sharing arrangements differ from those suggested by the optimal contract. Also, this contract can be implemented via a competitive auction with realistic informational requirements. Finally, the allocation of risk under the optimal contract suggests that PPPs are closer to public provision than to privatization.
Subjects:Bundling
cost of public funds
demsetz auction
minimum revenue guarantees
privatization
revenue and profit caps
scope of government,
subsidies.
JEL:H21
H54
L51
R42
Document Type:Working Paper
Appears in Collections:Center Discussion Papers, Economic Growth Center (EGC), Yale University

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