Public Goods, Private Partnerships, and Political Institutions

Abstract

Public–private partnerships (PPPs) have become an essential vehicle for infrastructure development worldwide. Theoretical arguments primarily focus on build-operate-transfer (BOT) agreements as a canonical form of PPP, though they rarely discuss the political underpinnings of governments’ decisions to enter such agreements. How does a government’s longevity, stability, and its capacity to raise revenue make BOTs more attractive than other types of partnerships? Extending recent theoretical advances through concepts of control rights and veto players and statistically analyzing a database of more than 4,300 PPP agreements for new construction of infrastructure in 83 developing economies between 1990 and 2014, I provide the first large-scale quantitative evidence of the influence of political institutions on government choices to adopt BOTs. I find that BOTs are less attractive as the tenure of the longest-serving veto player increases, when veto players are more frequently replaced, and when governments can generate more tax revenue, but more likely when that revenue is above a country’s historic average. My findings contribute to literatures on distributive public policy, hybrid governance, complex project management, and to the policy debate about the role of PPPs in economic development.

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