Evaluating Fiscal Supports for the Public-Private Partnership: Determinants of Short Contract Survival

Abstract

The marked increase in public-private partnerships (PPPs) has created both opportunities and fiscal challenges in developing countries. This paper examines how government's fiscal supports and the capacity of fiscal risk management explain the short survival of PPP contracts. The analysis shows that budget-constrained governments tend to adopt debt-hiding fiscal operation by structuring PPPs with guarantees when budget transparency is weak. After addressing contract endogeneity, the hazard estimation finds that guaranteed contracts face significantly high dispute risk due to fiscal manipulation and adverse selection. The paper quantifies how much infrastructure governance matters in determining the survival of guaranteed contracts.