Edited by Graeme A. Hodge, Carsten Greve and Anthony E. Boardman
Chapter 8: Assessing the Economic Worth of Public–Private Partnerships
8 Assessing the economic worth of public– private partnerships Anthony E. Boardman and Aidan R. Vining Introduction Many governments throughout the world are using public–private partnerships (P3s) to provide public goods, especially for infrastructure. The allure of P3s is obvious: they appear to offer the prospect of government control and ultimate ownership, while providing the benefits of private sector efficiency and private sector capital. For these and other reasons, they have been adopted in many areas, including highways, transit, hospitals and wastewater treatment plants. Billions of dollars of infrastructure spending have been incurred using variants of the P3 model. This trend may continue or even accelerate as governments try to stimulate their economies and face reduced tax revenues. Despite their importance and growing use, however, there has been little meaningful evaluation of P3s. For meaningful evaluation we must address the question: how should governments assess the economic worth of P3s? Or more familiarly: have governments spent taxpayers’ money wisely? In practice, the success of P3s has been measured in many different ways. The private sector mantra is that P3s come in ‘on time and on budget’. Somewhat more rigorously, P3s have been evaluated in terms of their ability to deliver ‘value for money’ (VfM). However, from an economic perspective the appropriate measure of government projects’ success is whether they increase economic (allocative) efficiency or, more broadly, aggregate social welfare. Thus far, no empirical study that we are aware of has attempted to measure allocative efficiency and to actually carry...
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