Institutional Quality and Public-Private Partnerships in Infrastructure

Josephine Baum Jørgensen

Student thesis: Master thesis


In recent decades, owing to a series of public debt crises and constraints on government expenditure, infrastructure investment has dropped significantly in both developed and developing countries. The drop in investment has enlarged the so-called infrastructure gap, particularly in developing countries, which is highly problematic, as the development of core infrastructures is a crucial multiplier for future growth. Therefore, to even out the gap and counterbalance the downward trend in investment in infrastructure, public-pri- vate partnership (PPP) schemes have been increasingly adopted. This paper provides the- oretical considerations as well as empirical evidence on the determinants of PPPs in in- frastructure, also known as private participation in infrastructure (PPI). Based on several regression analyses, it is shown that the quality of domestic institutions is a positive and significant predictor for a stronger participation of private enterprises in the delivery of public infrastructure in developing countries. The analysis, employing panel data that co- vers 137 countries from 1996 to 2014, is divided into two parts; one that measures the dependent variable (PPI) as the dollar value of total investment in the projects and another that measures the dependent variable as the number of projects. All regressions use the fixed effects specification. Specifically, the findings indicate that the dimensions Political Stability and Regulatory Quality have a positive and highly significant impact on the total value invested in PPI, while, for the number of PPI projects, Voice and Accountability, Government Effectiveness and Regulatory Quality is the most important positive predic- tors. The results from the regression analyses are robust to both outlier observations, com- mon time trend and heteroscedastic error variance.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2016
Number of pages128
SupervisorsMogens Kamp Justesen