The public-private partnership model is the funding model that is used in economics. When an individual is talking about PPP full form in economics it is a public-private partnership model that is used for all project related to public infrastructure. This infrastructure may vary from airport, power, telecommunications system and similar other things as such. This article is going to provide the readers with a complete overview of the public-private partnership model and its implication on society. Let us start with the basics of the PPP model.
What is the PPP Model?
A public-private partnership model is a form of cooperative arrangement that is made between private and public sectors for a considerable period. The application of this model enables the government and the business to come and work together for a project that caters to the needs of the populace. These projects include water and sewage, transport systems, school, college, hospital and similar other educational institutions.
This model also includes a wide range of risk allocations, requirement of transparency and also arrangements of funding. It is often referred to as new public management when it comes to the concept and practice of the PPP model in the modern days. This model has also been a controversial subject which gave birth to the debate of privatization.
Throughout history, the government has implemented this model as a mixed-initiative by public and private organizations. Also, this model has been studied through the vision of contract lens by numerous economists across the world. Let us have a look at the history of public-private partnerships.
History of The Public Partnership Model
Till now, we have informed you everything about the public-private partnership- from the PPP full form in economics to the definition and implication of the model. Here we are going to discuss the history of the public partnership model. The first study that was theoretically conducted on this subject was one by Oliver Hart. The difference that lies in the older form of services meant for public infrastructure was that the operating stages were bundled. This has led to the reason why private organizations in modern days have strong incentives in the building stage compared to the operating stage.
This model by Hart has also been extended in several ways. Various externalities have been explored between the building and the operating stages by several authors after Hart. This model has also been understood in five different levels. These levels include the tool of government, wider cultural phenomenon, statement of government policy and similar things as such. Now the risk allocation involved in PPP projects between the two entities as mentioned above is well defined. Also, the private sector entity obtains payments that are linked to performance. For instance, these payments are standardized to pre-determined performance which is measurable by the Public Department.
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