On the Efficient Provision of Roads

Abstract

The main problem with road provision in developing countries is lack of maintenance, which leads to increased transportation costs. Other important problems are the inefficient choice of projects and excessive costs of construction. To a large extent, these problems are due to a poor institutional design of the public works authority that exacerbates a host of agency problems.

We explore alternatives to improve road provision policies both under the traditional model and when using public-private partnerships. We discuss in detail the principles that should underly the institutions in charge of the road sector in both cases, and analyze the extent to which institutions that exist in different countries come close to this ideal.

Keywords: bundling, control rights, organizational form, privatization, cost of public funds, inefficient spending, productive efficiency, road maintenance

JEL Classification: H21, H54, L51, R42