The Determinants of Performance in Building Infrastructure in Transition Economies

30 Pages Posted: 24 Jun 2008

See all articles by Gabriela Dobrescu

Gabriela Dobrescu

UC Berkeley

Guido Friebel

Goethe University Frankfurt; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Pauline A. Grosjean

UC Berkeley

Katrin Robeck

affiliation not provided to SSRN

Date Written: March 2008

Abstract

We investigate how contract specificities affect the performance of municipal infrastructure projects in transportation, district heating, water and waste water, and solid waste. Using data from projects financed by the European Bank for Reconstruction and Development (EBRD), we look at the effect of involving private parties with different degrees of risk, and at the effect of involving public parties other than the respective municipality. In particular, central authorities may provide a sovereign guarantee for the funds lent by the bank. We construct two types of performance measures. First, timeliness of the projects is measured by (i) the total length of delays, (ii) the delays between signing and disbursement of funds, and (iii) the occurrence of political disruptions of the project. Second, to measure financial and commercial performance, we look at whether or not (iv) financial covenants and (iv) covenants about tariffs for infrastructure use were reached. We find that private participation without commercial risk (for instance, works or turnkey projects) tends to increase project performance. Private participation with commercial risk has no significant effect on project performance. Sovereign guarantees reduce delays but also decrease financial discipline. These effects are robust against potential selection effects, which we control for through instrumental variable regressions.

Keywords: public private partnerships, contracts, sovereign guarantee, risk sharing

Suggested Citation

Dobrescu, Gabriela and Friebel, Guido and Grosjean, Pauline A. and Robeck, Katrin, The Determinants of Performance in Building Infrastructure in Transition Economies (March 2008). Available at SSRN: https://ssrn.com/abstract=1108638 or http://dx.doi.org/10.2139/ssrn.1108638

Gabriela Dobrescu

UC Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Guido Friebel

Goethe University Frankfurt ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Pauline A. Grosjean (Contact Author)

UC Berkeley ( email )

210 Giannini Hall
Berkeley, CA 94720
United States

Katrin Robeck

affiliation not provided to SSRN

No Address Available

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