## Macroeconomic Dimensions of Public-Private Partnerships

_IMF Working Papers, March 24, 2016_

## Source details

**Canonical URL:** [Macroeconomic Dimensions of Public-Private Partnerships](https://www.imf.org/en/publications/wp/issues/2016/12/31/macroeconomic-dimensions-of-public-private-partnerships-43830)

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## Bibliographic details
- Authors: Edward F Buffie, Michele Andreolli, Grace B Li, Luis-Felipe Zanna
- Published: March 24, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484307700.001

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### Summary
- The paper compares public-private partnerships (P3s) and own-investment (OI) by the public sector using a dynamic general equilibrium model featuring private capital accumulation and involuntary unemployment with efficiency wages.
- Typical empirical features: P3s cost more but produce higher-quality infrastructure and have a better on-time completion record than OI.
- Because of these features, P3s are comparatively more effective in reducing:
  - underinvestment in private capital,
  - underinvestment in infrastructure,
  - unemployment, and
  - poverty.
- The asymmetric impact on macro externalities raises the social return in the P3 by "2 - 9 percentage points" relative to the social return to OI, depending on whether the externalities operate singly or in combination and on whether P3 enjoys an advantage in speed of construction.

### Model and Methodology
- Framework: dynamic general equilibrium model with:
  - private capital accumulation, and
  - involuntary unemployment modeled via efficiency wages.
- Focus: macroeconomic repercussions of infrastructure provision via P3s versus public own-investment (OI).

### Key Findings and Quantitative Results
- P3s typically:
  - incur higher costs than OI,
  - produce higher-quality infrastructure,
  - have a better on-time completion record.
- Macroeconomic outcomes where P3s outperform OI:
  - reduced underinvestment in private capital,
  - reduced underinvestment in infrastructure,
  - reduced unemployment,
  - reduced poverty.
- Impact on social return:
  - P3 raises the social return by "2 - 9 percentage points" relative to OI, conditional on:
    - which externalities are at play (singly or in combination), and
    - whether P3 enjoys an advantage in speed of construction.

### Policy Implications
- Considering macroeconomic externalities is essential when evaluating P3s versus OI.
- Higher upfront costs of P3s can be offset by:
  - higher infrastructure quality,
  - faster completion,
  - stronger positive spillovers to private capital accumulation and labor markets.
- Assessment of P3 projects should account for their potential to reduce unemployment and poverty via macroeconomic channels, not just microeconomic cost comparisons.

### Publication and Metadata
- Authors: Edward F Buffie, Michele Andreolli, Grace B Li, Luis-Felipe Zanna
- Publication date: March 24, 2016
- Series: IMF Working Papers
- Issue: 078
- Volume: 2016
- Pages: 49
- DOI: https://doi.org/10.5089/9781484307700.001
- Stock No: WPIEA2016078
- ISBN: 9781484307700
- ISSN: 1018-5941
- Subjects: Employment, Infrastructure, Labor, National accounts, Real wages, Unemployment, Unemployment rate, Wages
- Keywords: Africa, direct return, Employment, Infrastructure, infrastructure investment, involuntary unemployment, national budget, production function, Public-private Partnerships, Real wages, Underinvestment, Unemployment, Unemployment rate, wage curve, Wages, welfare gain, Welfare., WP

*Source: Macroeconomic Dimensions of Public-Private Partnerships (IMF Working Paper No. 2016/078), March 24, 2016.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/macroeconomic-dimensions-of-public-private-partnerships-43830_