IDEAS home Printed from https://ideas.repec.org/a/taf/transr/v30y2009i1p11-31.html
   My bibliography  Save this article

Private Provision of Highways: Economic Issues

Author

Listed:
  • Kenneth A. Small

Abstract

This paper reviews issues raised by the use of private firms to finance, build, and/or operate highways—issues including cost of capital, level and structure of tolls, and adaptability to unforeseen changes. The public sector’s apparent advantage in cost of capital is at least partly illusory due to differences in tax liability and constraints on the supply of public capital. The evidence for lower costs of construction or operation by private firms is slim. Private firms are likely to promote more efficient pricing. Effective private road provision depends on well‐structured franchise agreements that allow pricing flexibility, restrain market power, enforce a sound debt structure, promote transparency, and foster other social goals.

Suggested Citation

  • Kenneth A. Small, 2009. "Private Provision of Highways: Economic Issues," Transport Reviews, Taylor & Francis Journals, vol. 30(1), pages 11-31, July.
    • Handle: RePEc:taf:transr:v:30:y:2009:i:1:p:11-31
    DOI: 10.1080/01441640903189288
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/01441640903189288
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/01441640903189288?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. de Palma, Andre & Lindsey, Robin, 2002. "Private roads, competition, and incentives to adopt time-based congestion tolling," Journal of Urban Economics, Elsevier, vol. 52(2), pages 217-241, September.
    2. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2003. "Privatizing Highways in Latin America: Fixing What Went Wrong," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2003), pages 129-164, August.
    3. Small, Kenneth A., 1999. "Economies of scale and self-financing rules with non-competitive factor markets," Journal of Public Economics, Elsevier, vol. 74(3), pages 431-450, December.
    4. Dewatripont, Mathias & Legros, Patrick, 2005. "Public-private partnerships: contract design and risk transfer," EIB Papers 5/2005, European Investment Bank, Economics Department.
    5. Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup, 2006. "The marginal cost of public funds: Hours of work versus labor force participation," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1955-1973, November.
    6. J. Luis Guasch, 2004. "Granting and Renegotiating Infrastructure Concessions : Doing it Right," World Bank Publications - Books, The World Bank Group, number 15024.
    7. Ian W.H. Parry & Wallace E. Oates & Ian W.H. Parry & Wallace E. Oates, 2004. "Policy Analysis in the Presence of Distorting Taxes," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 4, pages 67-77, Edward Elgar Publishing.
    8. Timothy C. Irwin, 2007. "Government Guarantees : Allocating and Valuing Risk in Privately Financed Infrastructure Projects," World Bank Publications - Books, The World Bank Group, number 6638.
    9. Small, Kenneth A., 2001. "The Value of Pricing," University of California Transportation Center, Working Papers qt0rm449sx, University of California Transportation Center.
    10. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
    11. Small, Kenneth A. & Yan, Jia, 2001. "The Value of "Value Pricing" of Roads: Second-Best Pricing and Product Differentiation," Journal of Urban Economics, Elsevier, vol. 49(2), pages 310-336, March.
    12. Kenneth A. Small & Clifford Winston & Jia Yan, 2005. "Uncovering the Distribution of Motorists' Preferences for Travel Time and Reliability," Econometrica, Econometric Society, vol. 73(4), pages 1367-1382, July.
    13. Pablo T. Spiller, 2009. "An Institutional Theory of Public Contracts: Regulatory Implications," Chapters, in: Claude Ménard & Michel Ghertman (ed.), Regulation, Deregulation, Reregulation, chapter 3, Edward Elgar Publishing.
    14. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
    15. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    16. Klein, Michael, 1997. "The Risk Premium for Evaluating Public Projects," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(4), pages 29-42, Winter.
    17. Erik T. Verhoef & Kenneth A. Small, 2004. "Product Differentiation on Roads," Journal of Transport Economics and Policy, University of Bath, vol. 38(1), pages 127-156, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Athena Roumboutsos & Aristeidis Pantelias, 2015. "Allocating Revenue Risk in Transport Infrastructure Public Private Partnership Projects: How it Matters," Transport Reviews, Taylor & Francis Journals, vol. 35(2), pages 183-203, March.
    2. Clifford Winston & Jia Yan, 2008. "US Highway Privatization and Heterogeneous Preferences," Working Papers 2008-20, School of Economic Sciences, Washington State University.
    3. Roumboutsos, Athena & Pantelias, Aristeidis, 2021. "Addressing infrastructure investor risk aversion: Can project delivery resilience ratings help?," Utilities Policy, Elsevier, vol. 71(C).
    4. André de Palma & Robin Lindsey, 2009. "Traffic Congestion Pricing Methods and Technologies," Working Papers hal-00414526, HAL.
    5. Robin Lindsey, 2010. "Reforming Road User Charges: A Research Challenge For Regional Science," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 471-492, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2013. "The Basic Public Finance Of Public–Private Partnerships," Journal of the European Economic Association, European Economic Association, vol. 11(1), pages 83-111, February.
    2. Winston, Clifford & Yan, Jia, 2011. "Can privatization of U.S. highways improve motorists' welfare?," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 993-1005, August.
    3. Meng, Qiang & Lu, Zhaoyang, 2017. "Quantitative analyses of highway franchising under build-operate-transfer scheme: Critical review and future research directions," Transportation Research Part B: Methodological, Elsevier, vol. 102(C), pages 105-123.
    4. Diaz, A. & Proost, S., 2014. "Second-best urban tolling with distributive concerns," Economics of Transportation, Elsevier, vol. 3(4), pages 257-269.
    5. Cantos-Sánchez, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, José J. & Álvarez-SanJaime, Óscar, 2011. "Viability of new road infrastructure with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(5), pages 435-450, June.
    6. Mogens Fosgerau & Kurt Van Dender, 2013. "Road pricing with complications," Transportation, Springer, vol. 40(3), pages 479-503, May.
    7. Kenneth Small, 2015. "The Bottleneck Model: An Assessment and Interpretation," Working Papers 141506, University of California-Irvine, Department of Economics.
    8. Edward Calthrop & Bruno De Borger & Stef Proost, 2007. "Externalities And Partial Tax Reform: Does It Make Sense To Tax Road Freight (But Not Passenger) Transport?," Journal of Regional Science, Wiley Blackwell, vol. 47(4), pages 721-752, October.
    9. Wu, Wen-Xiang & Huang, Hai-Jun, 2014. "Finding anonymous tolls to realize target flow pattern in networks with continuously distributed value of time," Transportation Research Part B: Methodological, Elsevier, vol. 65(C), pages 31-46.
    10. Mark Lijesen & Victoria Shestalova, 2007. "Public and private roles in road infrastructure: an exploration of market failure, public instruments and government failure," CPB Document 146, CPB Netherlands Bureau for Economic Policy Analysis.
    11. Fu, Xinying & van den Berg, Vincent A.C. & Verhoef, Erik T., 2018. "Private road networks with uncertain demand," Research in Transportation Economics, Elsevier, vol. 70(C), pages 57-68.
    12. Meng, Qiang & Liu, Zhiyuan & Wang, Shuaian, 2012. "Optimal distance tolls under congestion pricing and continuously distributed value of time," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(5), pages 937-957.
    13. Light, Thomas, 2009. "Optimal highway design and user welfare under value pricing," Journal of Urban Economics, Elsevier, vol. 66(2), pages 116-124, September.
    14. Small, Kenneth A., 2015. "The bottleneck model: An assessment and interpretation," Economics of Transportation, Elsevier, vol. 4(1), pages 110-117.
    15. repec:ces:ifodic:v:3:y:2005:i:3:p:14567606 is not listed on IDEAS
    16. Jonathan Leape, 2006. "The London Congestion Charge," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 157-176, Fall.
    17. Fu, Xinying & van den Berg, Vincent A.C. & Verhoef, Erik T., 2018. "Private road supply in networks with heterogeneous users," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 430-443.
    18. Richard J. Arnott, 2005. "City Tolls – One Element of an Effective Policy Cocktail," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(03), pages 5-11, November.
    19. Richard J. Arnott, 2005. "City Tolls – One Element of an Effective Policy Cocktail," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(3), pages 5-11, November.
    20. Jang, Kitae & Chung, Koohong & Yeo, Hwasoo, 2014. "A dynamic pricing strategy for high occupancy toll lanes," Transportation Research Part A: Policy and Practice, Elsevier, vol. 67(C), pages 69-80.
    21. Jonathan E. Hughes & Daniel Kaffine, 2013. "When is Encouraging Consumption of Common Property Second Best? Sorting, Congestion and Entry in the Commons," Working Papers 2013-05, Colorado School of Mines, Division of Economics and Business.

    More about this item

    JEL classification:

    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:transr:v:30:y:2009:i:1:p:11-31. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/TTRV20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.