TY  - JOUR
AU  - Engel,Eduardo
AU  - Fischer,Ronald
AU  - Galetovic,Alexander
TI  - The Basic Public Finance of Public-Private Partnerships
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13284
PY  - 2007
Y2  - July 2007
UR  - http://www.nber.org/papers/w13284
L1  - http://www.nber.org/papers/w13284.pdf
N1  - Author contact info:
Eduardo Engel
Yale University
Department of Economics
P.O. Box 208268
New Haven, CT  06520-8268
Tel: 203/432-5595
Fax: 203/432-5779
E-Mail: eduardo.engel@yale.edu

Ronald Fischer
Centro de Economia Aplicada (CEA)
Departamento de Ingenieria Industrial
Universidad de Chile
Republica 701 Santiago CHILE
E-Mail: rfischer@dii.uchile.cl

Alexander Galetovic
Fac. Cs. Economicas y Empresariales
Universidad de Los Andes
Av. San Carlos de Apoquindo 2200
Santiago CHILE
E-Mail: alexander@galetovic.cl
AB  - Public-private partnerships (PPPs) cannot be justified because they free public funds. When PPPs are justified on efficiency grounds, the contract that optimally balances demand risk, user-fee distortions and the opportunity cost of public funds, features a minimum revenue guarantee and a revenue cap. However, observed revenue guarantees and revenue sharing arrangements differ from those suggested by the optimal contract. Also, this contract can be implemented via a competitive auction with realistic informational requirements. Finally, the allocation of risk under the optimal contract suggests that PPPs are closer to public provision than to privatization.
ER  -