Public investment as a driver of economic development and growth: What is the appropriate role of public-private partnerships?

In many countries, interest has been growing in forms of Public-Private Partnership (PPP) in which private companies are contracted to design, build, finance, and operate new social and economic infrastructure on behalf of government agencies (Farquharson et al. 2011). In large part, the economic case for the PPP model resides in its ability to effectively allocate the risks of infrastructure delivery, thereby creating incentives that can improve the planning and implementation of projects. The economic salience of this issue cannot be overstated. In its latest World Economic Outlook, the International Monetary Fund argues that the efficiency of public sector investment in infrastructure is a major driver of a country’s economic development and growth (Warner 2014). Efficiency entails that not only are assets produced at the lowest possible cost but also that investment decisions serve to maximize the benefits from the available resources. This chapter draws on theoretical and empirical research to evaluate the extent to which PPPs can contribute to these objectives.