Public private partnerships and budget constraints – investment decisions in public sector

The construction and provision of infrastructure services is often based on a partnership between public and private sector under a framework of Public Private Partnerships (PPPs). This type of partnership has been employed in Poland since 2009. Though public-private partnerships in Poland are a relatively young and promising investment model, they are still poorly developed. As a result, only a small number of projects (20%) managed to get funding. Given this observation, objective of this paper is to examine how local government’s economic and political characteristics contribute to the success of PPPs. Our research model builds on several key ideas concerning the motives for engaging in PPPs.(i) Most common explanation for public involvement in PPPs is that they helps to overcome the problem of occurring needs in the area of infrastructure because of using private finance and they also provide better value for money in the provision of public infrastructure. Accepting this research perspective we assume that the linkage between involvement in PPP projects and the level of infrastructure gap could be defined.(ii) E. Maskin and J. Tirole indicate that the marked increase in PPP contracts worldwide is often attributed less to the intrinsic qualities of such contracts than to governments' attempts to evade budget constraints by taking liabilities off the balance sheet. (iii) There are also many well documented instances where the location of public investment projects has been determined by political not economic factors. Following this research we assume, that PPPs can be politically attractive because they affect voting behaviour. In order to find out what factors exerts impact on PPP initiatives, a generalized linear model in the form of a logit model was used.