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When does a public-private partnership (PPP) lead to inefficient cost management? : Evidence from the Korean urban rail transit system

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  • When does a public-private partnership (PPP) lead to inefficient cost management?
  • Hong, Sounman
  • The Chartered Institute of Public Finance and Accountancy


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Title When does a public-private partnership (PPP) lead to inefficient cost management?
Similar Titles
Sub Title

Evidence from the Korean urban rail transit system

Material Type Articles
Author(English)

Hong, Sounman

Publisher

[London,U.K.]:The Chartered Institute of Public Finance and Accountancy

Date 2015-02
Journal Title; Vol./Issue Public Money and Management:
Pages 10
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Economic System
Territorial Development < Transport/Logistics
Holding CIPFA

Abstract

We examine whether a public-private partnership (PPP) improved the operational cost efficiency of Korea’s urban rail system. Results suggest that private participation did not reduce service operation costs. We explain how the absent cost advantage may be connected to the two characteristics defining a typical PPP: activity bundling and public-private risk sharing. We argue that if negative externalities exist between the project company and shareholders, public-private risk sharing may weaken the concessionaire’s cost management incentives.