Financing Costs and the Efficiency of Public-Private Partnerships

21 Pages Posted: 24 Nov 2020

See all articles by Besart Avdiu

Besart Avdiu

Goethe University Frankfurt

Alfons J. Weichenrieder

Goethe University Frankfurt - Department of Applied Econometrics and International Economic Policy; Vienna University of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: 2020

Abstract

The paper compares provision of public infrastructure via public-private partnerships (PPPs) with provision under government management. Due to soft budget constraints of government management, PPPs exert more effort and therefore have a cost advantage in building infrastructure. At the same time, hard budget constraints for PPPs introduce a bankruptcy risk and bankruptcy costs. Consequently, if bankruptcy costs are high, PPPs may be less efficient than public management, although this does not result from PPPs’ higher interest costs.

JEL Classification: H110, H540, G330

Suggested Citation

Avdiu, Besart and Weichenrieder, Alfons J., Financing Costs and the Efficiency of Public-Private Partnerships (2020). CESifo Working Paper No. 8711, Available at SSRN: https://ssrn.com/abstract=3736493 or http://dx.doi.org/10.2139/ssrn.3736493

Besart Avdiu (Contact Author)

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Alfons J. Weichenrieder

Goethe University Frankfurt - Department of Applied Econometrics and International Economic Policy ( email )

United States

HOME PAGE: http://www.uni-frankfurt.de/fb02/weichenrieder/

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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