Lay summary
LeadDecentralization and Public Private Partnerships are closely related phenomena. They are traditionally considered separately in the economic analysis. We aim to shed light on the link and interplay between the two concepts, both on the theoretical and empirical levels.AbstractDecentralization and Public Private Partnerships (hereafter designated as PPPs) have generated keen interest in a number of countries including both developed and developing countries. The reasons behind the popularity of PPPs are, to some extent, closely related to those which generally justify the move towards decentralization in the public sector. Indeed both phenomena obey the same basic logic: Competition both within the public sector and on private markets is good per se as it leads to cost reductions and hence to efficiency improvements.However, the literature on fiscal federalism and on PPPs have, so far, ignored one another.Decentralization may however have a large impact on contractual arrangements, especially when considering the choice between in-house and private provision of public services. We thus propose theoretical and empirical analysis of the interactions between decentralization and PPPs.AimsThe aim of the project is to shed light on the link between decentralization and the organizational forms of public service delivery. In particular our objective is to bridge the gap between the literature on fiscal federalism and on PPPs by providing theoretical and empirical analysis of the interplay between political and institutional arrangements and the provision of public services. We wish to analyze how different forms of decentralization and the resulting fiscal arrangements between different tiers of governments impact the choice of PPPs at both the central and local level. The theoretical analysis proposed in the project consists of models of game theory with asymmetry of information. To check on the relevancy of the models that we will develop, we intend to collect data on public service provision and to rely on spatial econometrics methods.ContributionsDecisions and management of the provision of a public service are undertaken by political entities, whose incentives are shaped by political arrangements. This project intends to provide a new and comprehensive understanding of the interplay between decentralization and the choice between public versus private provision of public services. In addition to a new theoretical framework, we also provide policy makers with guidelines regarding the efficiency of PPPs in different institutional settings and on when and how PPPs should be used in a federation.