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“Do public-private partnership enabling laws increase private investment in infrastructure?”

Author

Listed:
  • Daniel Albalate

    (Department of Econometrics, Statistics and Applied Economics & GiM-IREA University of Barcelona. C/ John Keynes 1-11, 08034 Barcelona. Tel: 34.93.4031131 Fax:34.93.4024573)

  • Germà Bel

    (Department of Econometrics, Statistics and Applied Economics & GiM-IREA University of Barcelona. C/ John Keynes 1-11, 08034 Barcelona. Tel: 34.93.4031131 Fax:34.93.4024573)

  • R. Richard Geddes

    (Department of Policy Analysis and Management. Cornell University 251 Martha Van Rensselaer Hall. Ithaca, NY 14853. Phone: (607) 255-8391.)

Abstract

Rising use of public-private partnerships, or PPPs, is an important development in U.S. infrastructure delivery. PPPs are detailed contracts between a public-sector infrastructure project sponsor and a private-sector provider that bundle delivery services. PPPs represent a middle ground between pure-public project delivery and complete privatization. As of 2016, thirty-five U.S. states had enacted PPP enabling laws. That legislation defines the broad institutional framework surrounding a PPP agreement. It addresses such questions as the mixing of public- and private-sector funds, the treatment of unsolicited PPP proposals, and need for prior legislative approval of PPP contracts, among other key issues. We provide the first thorough empirical assessment of the impact of PPP enabling laws on a state’s utilization of private investment. We analyze the overall effect of having a PPP enabling law while controlling for a variety of factors, including the state’s indebtedness, its broad political disposition, union membership, per-capita income, and other variables. We then assess the impact of thirteen individual PPP enabling-law provisions. We develop an expertinformed weighted index reflecting the degree to which a state’s law is encouraging or discouraging of private investment. We find that more favorable PPP enabling laws increase private investment: when our favorability index increases by one-tenth, the proportion of infrastructure investment delivered via PPP in a state increases by 0.5-0.6. We find that PPP enabling-law provisions allowing unsolicited proposals and the comingling of public and private funds are particularly important in attracting private investment.

Suggested Citation

  • Daniel Albalate & Germà Bel & R. Richard Geddes, 2018. "“Do public-private partnership enabling laws increase private investment in infrastructure?”," IREA Working Papers 201815, University of Barcelona, Research Institute of Applied Economics, revised Jul 2018.
    • Handle: RePEc:ira:wpaper:201815
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    References listed on IDEAS

    as
    1. R. Richard Geddes, 2011. "The Road to Renewal: Private Investment in U.S. Transportation Infrastructure," Books, American Enterprise Institute, number 29723, September.
    2. Bennett, John & Iossa, Elisabetta, 2006. "Building and managing facilities for public services," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2143-2160, November.
    3. Martimort, David & Pouyet, Jerome, 2008. "To build or not to build: Normative and positive theories of public-private partnerships," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 393-411, March.
    4. Germà Bel & Xavier Fageda, 2009. "Factors explaining local privatization: a meta-regression analysis," Public Choice, Springer, vol. 139(1), pages 105-119, April.
    5. Geddes, R. Richard & Wagner, Benjamin L., 2013. "Why do U.S. states adopt public–private partnership enabling legislation?," Journal of Urban Economics, Elsevier, vol. 78(C), pages 30-41.
    6. Mr. Etienne B Yehoue & Miss Mona Hammami & Jean-François Ruhashyankiko, 2006. "Determinants of Public-Private Partnerships in Infrastructure," IMF Working Papers 2006/099, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Transportation infrastructure; public-private partnerships; private investment; state public-private partnership enabling laws; fiscal constraints. JEL classification:L14; L33; L51; L92; L98.;
    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
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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