Towards a Principal-Agent Based Typology of Risks in Public-Private Partnerships

24 Pages Posted: 21 Sep 2009

See all articles by André de Palma

André de Palma

Institut Universitaire de France

Guillaume Prunier

affiliation not provided to SSRN

Luc Leruth

International Monetary Fund (IMF)

Date Written: August 2009

Abstract

There is a strong economic rationale for close cooperation between the public and private sectors. This has resulted in a significant increase in the demand for the provision of public services through instruments combining public and private money such as public-private partnerships (PPPs or P3s). We describe these arrangements and explore how they can be analyzed using standard tools in economics (incentives and principal-agent theory). We discuss the implications of our approach in terms of identifying risks that are often overlooked before turining to the optimal risk-sharing between the public and private partners, in particular with respect to information asymmetries in risk perceptions. This allows us to propose a typology of the risks associated with PPPs, where both internal risks (the risks associated with the contract) and external risks (those associated with the project) are considered.

Keywords: Burden sharing, Financial risk, Fiscal management, Fiscal transparency, Infrastructure, Private sector, Public enterprises, Public finance, Public sector, Transport

Suggested Citation

de Palma, André and Prunier, Guillaume and Leruth, Luc, Towards a Principal-Agent Based Typology of Risks in Public-Private Partnerships (August 2009). IMF Working Papers, Vol. , pp. 1-23, 2009. Available at SSRN: https://ssrn.com/abstract=1475518

André De Palma (Contact Author)

Institut Universitaire de France ( email )

103, bld Saint-Michel
75005 Paris
France

Guillaume Prunier

affiliation not provided to SSRN

No Address Available

Luc Leruth

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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