Efficient Public-Private Capital Structures
Annals of Public and Cooperative Economics Vol. 85 No. 1
25 Pages Posted: 22 Dec 2010 Last revised: 18 Sep 2014
Date Written: 2014
This paper presents a rationale for hybrid public-private capital structures in public utilities. The public sector can borrow money cheaper, while private investors can spawn life-cycle cost savings. When investment vehicles enable the internalization of the financial advantage of the public sector and the managerial advantage of the private sector, a Pareto-efficient capital structure is achieved with both the public and private parties as shareholders. I show how different knowledge transfer schemes determine the optimal shareholding structure for the utility company.
Keywords: Public-Private Partnerships, Ownership Structures, Public Investment Policy, Knowledge Transfer, Water Utilities
JEL Classification: G32, H43, H54, L32, L95
Suggested Citation: Suggested Citation