Local and territorial determinants in the realization of public–private–partnerships: an empirical analysis for Italian provinces

ABSTRACT

Relational networks and intangible factors are crucial elements for the competitiveness of a territory. Public–Private–Partnerships (PPPs), in particular, allow for the provision of goods and services that favour the exploitation of complementarities between public and private resources. They aim at promoting an increase in the overall efficiency of investment projects through a complex mechanism that distributes risk and revenues among stakeholders. This paper examines the local and territorial determinants of PPPs through an econometric analysis based upon Italian municipal data, grouped at the provincial level. Using a tobit model, we analyse the relationship between the realization of successful PPP initiatives and different sets of factors, including less analysed local and territorial determinants. We stress the role of the local management of infrastructure assets, the administrative efficiency of local authorities and the diffusion of previous local development initiatives. Local management and territorial context factors explain most of the occurrence of successful PPP initiatives in the pre-crisis period while usual determinants (infrastructure endowment and financial distress) display a weaker effect.

KEYWORDS:

• Public–private–partnerships
• territorial determinants
• local assets
• territorial capital
• Italy

Acknowledgements

The authors acknowledge the support in data collection by Giada Cuticchio in the early stages of the paper. The authors would like to thank the anonymous referee and the Editor for the helpful comments received.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Fabio Mazzola http://orcid.org/0000-0001-7238-8591

Alessandro Cusimano http://orcid.org/0000-0001-7935-4116

Giuseppe Di Giacomo http://orcid.org/0000-0003-4295-0939

Rosalia Epifanio http://orcid.org/0000-0003-3013-1629

Notes

1 PPP accounted for almost 4% of the total number of tenders for public works in Italy in 2007 but for almost 20% in terms of the value of investments. Nearly 80% of these operations were carried out by municipalities (Iossa & Antellini Russo, 2008).

2 Larger projects tend to be more costly, leading to higher hidden and development costs, and the selection process is, in this case, stronger, thus determining a reduction of awards. Size is, therefore, an important element to take into account when examining actual completion of PPPs (Reeves et al., 2015).

3 For instance, Albalate, Bel, and Geddes (2015) found a significant result for fiscal variables and infrastructure endowments in an analysis of the determinants of PPPs at the local and state level in the U.S. before 2008 but did not consider any explicit local and territorial explanatory variables in the analysis.

4 This phenomenon clearly increased with the explosion of the crisis because of the introduction of the so-called Internal Stability Pact which, starting from 2010, has imposed a constraint for the increase of expenditures by local administrations with respect to the previous year.

5 For more details see also Engel, Fischer, and Galetovic (2014).

6 A theoretical model that shows when a government should use PPPs instead of conventional procurement is provided by Bentz et al. (2005).

7 In their analysis on the determinants of the length of the tendering period in the U.K., Reeves et al. (2017) estimate the minimum and average tendering periods as 8 and 35 months, respectively.

8 This phenomenon also depends on the efficiency of the administrative process, which is strictly related to the length of the tendering period. Competition may be reduced even if there is a perception of inefficiency by potential private investors.

9 In some specifications, a slightly different version of Equation (3) has been used. This has been detailed in the Results section.

10 Italian Observatory on Project Financing contains information on all initiatives related to public–private partnerships at the municipality level.

11 Tagliacarne’s index was chosen in preference to other infrastructure indices used in Italy (Di Palma & Mazziotta, 2002; Messina, 2008).

12 It was not possible to refer to municipality fiscal sheets for previous years because they referred to the pre-euro period. This introduces a potential endogeneity problem, which is discussed in note 15.

13 The financial expenditure on infrastructure is obtained through the perpetual inventory method. More details on the construction of the index can be found in Picci (2002). The index of infrastructure endowment is taken from Di Palma and Mazziotta (2002).

14 For this variable and the previously defined index of fiscal pressure we are aware of a potential risk of reverse or simultaneous causality. Therefore, in order to mitigate it, we estimated an OLS regression of each of these two variables on both our outcome measures but we did not find any statistical evidence of reverse causality. However, we are aware that the approach adopted could be potentially not sufficient to exclude the risk.

15 In Tables 5 and 6, robust standard errors have been estimated using Huber/White/sandwich estimator.

16 Geddes and Wagner (2013) in an analysis of the motivation for PPPs in the US found little evidence that states’ fiscal constraint as measured by fiscal health (debt outstanding) is an important driver in the decision to introduce PPP regulations.

17 This is reported in Table A1 in Appendix.

18 This means that we need to remove the GDP per capita from the subset of our classical controls.

19 Such result is in line with the one obtained by Antellini Russo and Zampino (2012) since the South displays a higher percentage of tenders but a lower percentage of PPP initiatives that are actually completed.

20 Indeed, a negative high correlation does exist between the South dummy and many variables of the model (municipal revenues, municipal efficiency, local development, per capita GDP and social capital).

21 Similar results, not reported for brevity, are obtained by considering, as an alternative outcome variable, the ratio between the positive outcomes of PPPs and population of provinces.

Additional information

Funding

This work was supported by the Italian Ministry of Education, University and Research (MIUR) through the Fund for Research Projects of National Interest (PRIN) [Grant Project Number 2008PP5E98].