Macroeconomic Dimensions of Public-Private Partnerships
This study investigates the repercussions of public-private partnerships and own-investment by the public sector
Abstract
The voluminous literature comparing public-private partnerships (P3s) and own-investment (OI) by the public sector is dominated by contributions from microeconomic theory. This paper gives macroeconomics a voice in the debate by investigating the repercussions of P3 vs. OI in a dynamic general equilibrium model featuring private capital accumulation and involuntary unemployment with efficiency wages. Typically P3s cost more but produce higher-quality infrastructure and boast a better on-time completion record than OI; consequently, they are comparatively more effective in reducing underinvestment in private capital, underinvestment in infrastructure, unemployment and poverty. The asymmetric impact on macro externalities raises the social return in the P3 2 - 9 percentage points relative to the social return to OI, depending on whether the externalities operate singly or in combination and on whether P3 enjoys an advantage in speed of construction.
This work is part of the ‘Macroeconomics in Low-income countries’ programme
Citation
Edward F Buffie, Michele Andreolli, Bin Grace Li, Luis-Felipe Zanna (2016) Macroeconomic Dimensions of Public-Private Partnerships. IMF Working Paper No. 16/78