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Financing the economy in debt times: The crucial role of public–private partnerships

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  • Amedanou, Yawovi Mawussé Isaac

Abstract

This paper aims to show that there is a great interest for countries to rely on Public–Private Partnerships (PPPs) as a tool for financing the economy, especially in times of debt. First, we conceptualize through game theory a better risk management between the public and private sectors in case of co-investment. Second, building on Iossa and Martimort (2009), we demonstrate that PPPs investments produce greater economic and social gains than pure public investments by providing incentives and transferring risks to the private sector. The implications of the model are diverse: financing the provision of public infrastructure through PPPs allows for sharing the associated risks, improves the quality and reduce the costs of the provision of public goods. The model has been empirically tested on 14 Sub-Saharan African countries over the period 1990–2017. The impact of PPP investments is significantly higher than that of pure public investments. The evidence also shows that the positive impact of PPP investments strengthens economic growth as the public debt grows to a point where there is no longer any significant pro growth impact.

Suggested Citation

  • Amedanou, Yawovi Mawussé Isaac, 2023. "Financing the economy in debt times: The crucial role of public–private partnerships," Research in Economics, Elsevier, vol. 77(3), pages 295-309.
    • Handle: RePEc:eee:reecon:v:77:y:2023:i:3:p:295-309
    DOI: 10.1016/j.rie.2023.05.003
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    More about this item

    Keywords

    Public–private partnerships; Pure public investment; Cooperative game; Risk management; Economic growth; Public debt; Fiscal constraints;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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