Macroeconomic Dimensions of Public-Private Partnerships

50 Pages Posted: 27 Sep 2016

See all articles by Edward F. Buffie

Edward F. Buffie

Indiana University Bloomington - Department of Economics

Michele Andreolli

International Monetary Fund (IMF)

Bin (Grace) Li

International Monetary Fund

Luis-Felipe Zanna

International Monetary Fund (IMF)

Date Written: March 2016

Abstract

The voluminous literature comparing public-private partnerships (P3s) and own-investment (OI) by the public sector is dominated by contributions from microeconomic theory. This paper gives macroeconomics a voice in the debate by investigating the repercussions of P3 vs. OI in a dynamic general equilibrium model featuring private capital accumulation and involuntary unemployment with efficiency wages. Typically P3s cost more but produce higher-quality infrastructure and boast a better on-time completion record than OI; consequently, they are comparatively more effective in reducing underinvestment in private capital, underinvestment in infrastructure, unemployment and poverty. The asymmetric impact on macro externalities raises the social return in the P3 2 - 9 percentage points relative to the social return to OI, depending on whether the externalities operate singly or in combination and on whether P3 enjoys an advantage in speed of construction.

Keywords: Public-private Partnerships, Unemployment, Underinvestment, Welfare.

JEL Classification: D61, E22, E23, E60, H40, H43, O11, O22, P35

Suggested Citation

Buffie, Edward F. and Andreolli, Michele and Li, Bin (Grace) and Zanna, Luis-Felipe, Macroeconomic Dimensions of Public-Private Partnerships (March 2016). IMF Working Paper No. 16/78, Available at SSRN: https://ssrn.com/abstract=2844156

Edward F. Buffie (Contact Author)

Indiana University Bloomington - Department of Economics ( email )

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Michele Andreolli

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
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Bin (Grace) Li

International Monetary Fund ( email )

700 19th Street NW
Washington, DC 20431
United States

HOME PAGE: http://binli.economics.googlepages.com/

Luis-Felipe Zanna

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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