Maintenance Costs, Outside Options and Optimal Ownership of a Public Good

In: The B.E. journal of economic analysis & policy, Band 10, Heft 1

Abstract

Abstract
There has been much attention recently to public-private partnerships and the involvement of NGOs in public good provision. This paper re-examines the effect of ownership of a public good on investment incentives when contracts are incomplete. In the presence of maintenance costs, it is shown that the leading result in the literature by Besley and Ghatak (2001) does not carry through. In some circumstances, project ownership should be allocated to the party that values the project relatively less. The model is applied to the case of environmental conservation and investigates the advantages of Payments for Environmental Services from the point of view of investment incentives in conservation.