Summer 2014 (Vol. 53, No. 2)

Do State Fiscal Constraints Affect Implementation of Highway Public-Private Partnerships? A Panel Fixed Logit Assessment

Abstract

Infrastructure public-private partnerships (“P3s”) have gained considerable recognition as useful policy tools for state and local governments to deliver critically needed infrastructure projects. The objective of this study is to empirically test one of the claims often made regarding states’ motivations for employing this procurement mechanism: P3s can help overcome fiscal constraints on state infrastructure investment. In addition, this study empirically analyzes how state P3 enabling legislation affects the behavior of both the public and private sectors. A regular logit model and a fixed effects logit panel model are employed to test the hypothesis that states with more severe fiscal constraints are more likely to seek P3s for highway infrastructure construction and finance. After controlling for such factors as state economic condition, legislative political affiliation, and highway travel demand, the empirical results indicate that states’ fiscal constraints are not associated with the propensity to use highway P3 projects.

by Zhenhua Chen, Nobuhiko Daito, and Jonathan L. Gifford

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