Towards a Principal-Agent Based Typology of Risks in Public-Private Partnerships
IMF Working Papers, August 1, 2009
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- Towards a Principal-Agent Based Typology of Risks in Public-Private Partnerships
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Bibliographic details
- Authors: André De Palma, Guillaume Prunier, Luc E. Leruth
- Published: August 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451873245.001
Main purpose and approach
- Describes public-private partnerships (PPPs or P3s) and the strong economic rationale for close cooperation between the public and private sectors.
- Analyzes PPP arrangements using standard tools in economics: incentives and principal-agent theory.
- Discusses implications for identifying risks often overlooked before turning to the optimal risk-sharing between public and private partners, with particular attention to information asymmetries in risk perceptions.
- Proposes a typology of the risks associated with PPPs that distinguishes internal risks (the risks associated with the contract) and external risks (those associated with the project).
Key findings and insights
- There has been a significant increase in the demand for the provision of public services through instruments combining public and private money such as public-private partnerships (PPPs or P3s).
- Information asymmetries in risk perceptions between public and private partners can lead to overlooked risks and suboptimal risk-sharing.
- Typology of PPP risks emphasizes both:
- Internal risks: risks associated with the contract.
- External risks: risks associated with the project.
Notable risk types and related keywords (as presented)
- a number of risk
- construction risk
- demand risk
- exploitation company
- firm
- government
- government ownership
- government policy
- government to risk
- infrastructure financing
- PPP partner
- principal-agent framework
- private sector
- private sector operator
- Public investment and public-private partnerships (PPP)
- Public sector
- public-private partnerships
- renegotiation risk
- residual value risk
- risk
- risk classification
- Risks of public-private partnership
- Transportation
- transportation infrastructure
- value for money
- WP