Do More Accountable Governments Resort More to Public Private Partnerships?

Abstract: The drivers of improvements in efficiency that public private partnerships (PPPs) can contribute to the delivery of public services have been largely highlighted by the theoretical literature, but empirical evidence is still scant and prone to identification issues. In this paper, we present an indirect way of assessing their relative efficiency by estimating whether more fiscal accountable governments, that have a hardened budget constraint and hence higher incentives to look for efficiency gains, resort more to PPPs. Our identification is based on subnational governments, for which fiscal accountability varies across and within countries. We use panel data on the number of PPPs and subnational fiscal accountability in 30 OECD countries over the 1994-2011 period. Our results show a significant, robust and important positive impact of an increase in subnational authorities' accountability on the number of PPPs developed at the local level. Our results also highlight that this effect varies with institution-specific design. We use data on the value and mean value of PPPs to confirm that it is efficiency considerations that drive more accountable subnational governments to resort more to PPPs.