Financing Costs and the Efficiency of Public-Private Partnerships
Weichenrieder, Alfons J.
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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.
public-private partnerships, infrastructure, financing costs, default
H11, H54, G33
Link to Publication
- LIF-SAFE Working Papers