Public-Private Partnerships and Investment in Infrastructure

41 Pages Posted: 30 Sep 2010 Last revised: 2 Oct 2010

See all articles by Sonia Araujo

Sonia Araujo

Organisation for Economic Co-operation and Development (OECD)

Douglas Sutherland

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: September 23, 2010

Abstract

How can governments reap the potential benefits of public-private partnerships (PPPs) in the provision of infrastructure? Private sector involvement in the provision of public goods is long-standing, often relying on franchises or concessions. More recently, PPPs have risen in prominence, promising innovative solutions and a better allocation of inputs than traditional procurement with separate concessions. However PPPs are not without risks with the outcome depending on the identification of the most efficient bidder, the risk sharing between the public and private sector and the design of the contractual relationship. Furthermore, PPPs, particularly when they are used to circumvent budgetary constraints, present risks to government budgets by creating large contingent liabilities. Drawing on a discussion of the economics of PPPs in relation to infrastructure and questionnaire responses, synthetic indicators are used to assess how well-suited policy frameworks in the OECD are to benefit from PPPs. The results show marked heterogeneity across countries, suggesting there is scope to improve performance and gain expertise by considering other countries' experiences.

Keywords: Public-Private Partnerships, Public Goods, Incomplete Contracts, Investment Incentives

JEL Classification: D23, H41, L33

Suggested Citation

Araujo, Sonia and Sutherland, Douglas, Public-Private Partnerships and Investment in Infrastructure (September 23, 2010). OECD Economics Department Working Paper No. 803, Available at SSRN: https://ssrn.com/abstract=1685344 or http://dx.doi.org/10.2139/ssrn.1685344

Sonia Araujo

Organisation for Economic Co-operation and Development (OECD) ( email )

Paris
France

Douglas Sutherland (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

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