DP2725 Government versus Private Ownership of Public Goods

Author(s): Timothy J. Besley, Maitreesh Ghatak
Publication Date: March 2001
Keyword(s): Public Goods, Public Ownership, Public-Private Partnerships
JEL(s): D73, H40, O17
Programme Areas: Industrial Organization, Public Economics
Link to this Page: http://www.cepr.org/pubs/dps/DP2725

There has been a dramatic change in the division of responsibility between the state and the private sector for the delivery of public goods and services in recent years with an increasing trend towards contracting out to the private sector and ‘public-private partnerships’. This Paper analyses how ownership matters in public good provision. We show that if contracts are incomplete then the ownership of a public good should lie with a party that values the benefits generated by it relatively more. This is true regardless of whether this party is also the key investor, or other aspects of the technology.