Determinants of PPP in infrastructure in developing economies

Abstract

PurposeThe purpose of this paper is to analyze the factors that determine Public Private Partnership (PPP) in infrastructure by using a unique data set on Private Participation in Infrastructure (PPI) for the period 1990‐2008. The study mainly focuses on developing countries, because these countries need PPP arrangement more urgently than any other group of countries.Design/methodology/approachFor the analysis, a range of advanced panel estimators, namely random‐Poisson, negative binomial, random‐generalized least square (GLS), random‐tobit, zero‐inflated Poisson (ZIP), are utilized to overcome the potential data‐related problems and for the robustness check of the estimated results.FindingsThe results of the analysis suggest that large size and relatively higher income markets attract more PPP projects. The empirical evidence also suggests that macroeconomic stability, quality of regulation and governance are important factors in determining PPP in the infrastructure. Surprisingly, however, the evidence fails to provide any strong support for the role of political factors and budget constraint in the process.Practical implicationsThe findings of this study will help the policymakers of developing countries in framing up such policies, so as to encourage more private firms to engage in infrastructure building through PPP.Originality/valueThe paper describes the first attempt of its kind to investigate the determinants of PPP in the context of developing countries.