The Effectiveness Of Public-Private Partnership(PPP)as A Financing Tool For Local Governments

Public-private partnership(PPP)is a long-term contractual collaboration between the public and private sectors.Existing literature shows that the motivations of governments to use PPP usually include achieving efficiency gains in service delivery,involving the private capital,and promoting the government capacity.In developing and transitioning countries,PPP becomes one of the most important financing tools for governments.PPP soared after 2014 in China due to the promotion of the Ministry of Finance(MOF)and the National Development and Reform Commission.Some puzzles remain in the further development of PPP in China.One thing is that PPP faced an abrupt brake in 2017 despite increasing challenges on economic development in China If PPP is regarded as a financing tool that would trigger economic boosts,why China stops promoting PPP?How does Chinese governments,in particular,local governments perceive PPP?The other concern is the slow adoption of PPP projects The government was not satisfied with the low "landing rate,”that is,the ratio of PPP projects in execution to all projects that have been identified.Slow adoption could be hazardous to the effectiveness of PPP.What factors contribute to PPP adoption?This research aims to answer the above questions.By taking a lens of local government financing,this dissertation provides two models regarding PPP's role and PPP'effective adoption based on the PPP database of MOF.To examine the role of PPP,we build a multi-level regression model on the provincial and the municipal level using data of 12,047 PPP projects between 2015 to 2017.To examine the influence factors of PPP adoption,we build a probit model on the provincial level using data of 12,193 PPP projects between 2012-2016.This research presents three sets of findings.First,comparing to others with higher fiscal transparency,local governments with lower fiscal transparency rely more on PPP's financing function.The results of the multi-level regression model show that PPP usually substitutes local government bonds Fiscal transparency constrains the extent of substitution between PPP and local government bonds.Second,PPP is not an effective financing tool,but its performance gets better with time.The PPP adoption rate could serve as a key indicator to evaluate PPP's effectiveness as a financing tool.The speed of PPP adoption is not that satisfying PPP one-year adoption rate is almost zero in 2012,and it increases to 10%in 2016 Third,higher government credibility and capacity contribute most to effective PPP adoption.The transaction cost theory indicates that factors of the government,the market,the operating environment,and project characteristics could affect the PPP adoption process.The results of the probit model show that government factors matter more,comparing to factors in other pillarsThe findings echo the argument in the existing literature that PPP is not the best financing approach for local.Local governments would turn to PPP's financing function only when they face financial constraints.China's experiences are also consistent with PPP' s practice in developed countries.No matter in rich countries or transitioning economies,good governance remains fundamental in achieving PPP success.This dissertation sheds additional lights in the following aspects.First,the study takes the new lens of locgovernmentsal government financing in PPP studies,which benefits our understanding of PPP and other financing tools.Second,the study provides a comprehensive framework of the government,the market,the operating environment,and project characteristics.It is hoped that this framework could be further used in other research areas including PPP governance and cross-sector policy tools as well.Third,the study tries to uncover the financing strategy and financing preference of local governments in China.The perspective of local governments' financing strategy enriches the literature of local government financing competition in China.The research provides the following policy advice.In terms of the central government,China should form adequate policy goals of PPP,emphasizing PPP's advantage in efficiency gains.In terms of local governments,China should strengthen the information disclosure and enhance the government capacity in managing PPP as well as local government financing.