The impact of local government fiscal gaps on public-private partnerships: government demand and private sector risk aversion
Zhao, Jerry Zhirong
MetadataShow full item record
Xiong, M., Cheng, S., Guo, H., & Zhao, J. Z. (2022). The impact of local government fiscal gaps on public-private partnerships: Government demand and private sector risk aversion. International Public Management
While government fiscal gap is traditionally considered a demand factor for the use of public-private partnerships (PPPs) to deliver public services, a high level of fiscal gap may signal elevated financial risks to private partners and deter them from entering into PPP agreements. A causal mediation analytic framework is used to delineate the two distinct causal pathways. We develop a conceptual model and test derived hypotheses with data of Chinese prefecture-level cities during 2015–2017. The findings suggest that government fiscal gap has a positive impact on PPP adoption, through the mediating role of the debt position. The fiscal gap, as a risk factor, is negatively associated with PPP participation. Risk aversion of the private sector manifests more conspicuously as smaller PPP investment amounts than as a lower likelihood of PPP participation. The adverse effects of the fiscal gap associated with financial risks may entirely offset any positive impact.
Click on the DOI to access this article (may not be free).