Financing Infrastructure in the Shadow of Expropriation
We examine the optimal financing of infrastructure when governments have limited financial commitment and can expropriate rents from private sector firms that manage infrastructure. While private firms need incentives to implement projects well, governments need incentives to limit expropriation. This double moral hazard limits the willingness of outside investors to fund infrastructure projects. Optimal financing involves government guarantees to investors against project failure to incentivize the government to commit not to expropriate which improves private sector incentives and project quality. The model captures several other features prevalent in infrastructure financing such as government co-investment, tax subsidies, development rights, and cross-guarantees.
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Copy CitationViral V. Acharya, Cecilia Parlatore, and Suresh Sundaresan, "Financing Infrastructure in the Shadow of Expropriation," NBER Working Paper 30131 (2022), https://doi.org/10.3386/w30131.Download Citation
Published Versions
Viral V Acharya & Cecilia Parlatore & Suresh Sundaresan & Itay Goldstein, 2025. "Financing Infrastructure in the Shadow of Expropriation," The Review of Financial Studies, vol 38(5), pages 1368-1418.
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