Public-Private Partnership and Economic Efficiency: A Case Study of the Korean Urban Rail Transit System
30 Pages Posted: 5 Oct 2014 Last revised: 2 Feb 2015
Date Written: October 3, 2014
This study examines whether a public-private partnership (PPP) arrangement improved operational cost efficiency in Korea’s urban rail transit system. Overall, evidence suggests that private participation has not contributed to cost reduction in service operation. The study also explains how the absence of cost advantage in the private partnership may be associated with the two defining characteristics of a typical PPP: the bundling of different activities into a single contract and risk sharing between the public and private parties. I argue that, if negative externalities exist across the bundled activities, the risk sharing between the public and private parties may greatly weaken the concessionaire’s incentive for cost management.
Keywords: Public-Private Partnership (PPP), Urban rail transit, Privatization, Productive Efficiency
JEL Classification: L32, L51, L92, N45, N75, O18, R41
Suggested Citation: Suggested Citation