Engel E., Fischer R., Galetovic A. (2011).

Abstract:

Spending on necessary infrastructure is likely to be cut back in coming decades, as the federal and state governments struggle with large debt burdens. This will hamper future growth, particularly given the dismal state of current infrastructure. The American Society of Civil Engineers estimates that, as a result of decades of insufficient investment, the infrastructure deficit in the United States amounts to $2.2 trillion. In particular, spending on roads is little more than a third of the estimated requirement of $186 billion per year. The lack of resources for infrastructure maintenance and improvement extends across all sectors, from levees to wastewater treatment, and from transportation to schools. In this context, public-private partnerships (PPPs) seem a godsend to replace the lack of government investment, by promising the availability of large amounts of resources for infrastructure projects. Despite these promises, the wave of PPPs that changed infrastructure provision in many countries during the last two decades only has had minor impact in the United States. While the UK financed $50 billion in transportation infrastructure via PPPs between 1990 and 2006, the US, an economy more than six times as large as the UK, only financed approximately $10 billion during this period. While some countries succeeded in harnessing PPPs to develop their infrastructure, most found that PPPs can lead to surprisingly bad outcomes. The object of this paper is to offer proposals that make it more likely that PPPs fulfill a useful role in the recovery of American infrastructure.