Political opportunism and transaction costs in contractual choice of public–private partnerships
| Published date | 01 December 2022 |
| Author | Wei Xiong,Ninghua Zhong,Feng Wang,Muyang Zhang,Bin Chen |
| Date | 01 December 2022 |
| DOI | http://doi.org/10.1111/padm.12760 |
ORIGINAL ARTICLE
Political opportunism and transaction costs in
contractual choice of public–private partnerships
Wei Xiong
1
| Ninghua Zhong
1
|FengWang
2
| Muyang Zhang
2
|
Bin Chen
3
1
School of Economics and Management,
Tongji University, Shanghai, China
2
China Public Finance Institute and School of
Public Economics and Administration,
Shanghai University of Finance and
Economics, Shanghai, China
3
Austin W. Marxe School of Public and
International Affairs, Baruch College and The
Graduate Center, The City University of
New York, New York, New York, USA
Correspondence
Muyang Zhang, China Public Finance Institute
and School of Public Economics and
Administration, Shanghai University of
Finance and Economics, Fenghuang Bldg., 777
Guoding Rd, Shanghai, 200433, China.
Email: zhang.muyang@mail.shufe.edu.cn
Funding information
Fundamental Research Funds for the Central
Universities of China, Grant/Award Numbers:
2019110249, 22120210085; National
Natural Science Foundation of China, Grant/
Award Numbers: 71603156, 71702132,
71734001, 71973101; National Social Science
Foundation of China, Grant/Award Number:
19ZDA073
Abstract
The New Public Management (NPM) has achieved many
successes in public service delivery, but practitioners fre-
quently observed failures in developing and transitional
economies. For instance, China's public–private partner-
ships (PPP) since 2014 have failed to transfer risks to the
private sector, to involve private skills and expertise, and to
reduce local government's debt. This article claims that PPP
failures in China are associated with the contractual type of
nonconcessions and the contractual choice is influenced by
both political opportunism and transaction costs. Utilizing
data of PPP projects in China during 2014–2016, we find
that more opportunistic bureaucrats seek to increase pro-
jects of nonconcessions, but transaction costs caused by
product complexities hinder governments' reliance on non-
concessions. This research extends the core analysis of
PPPs in the literature from transaction costs to political
opportunism, which widely exists in developing and transi-
tional economies. Thus, our findings partially explain the
failure of their NPM practices.
新公共管理运动在公共服务供给领域取得了瞩目的成就，但
在发展中国家与转型经济体中也经历过挫折。例如，自
2014年以来，中国推行的政府与社会资本合作(PPP)模式就
未能实现将风险转移到私营部门、引入私营部门的技术和经
验及减轻地方政府的债务负担的初衷。正鉴于此，在2017
年时，中国财政部对PPP项目进行了大范围的整改。针对这
一现象，本文理论分析认为，其主要原因在于地方政府采用
了大量非特许经营合同，而该类合同具有低风险、弱运营及
Received: 14 August 2020 Revised: 24 May 2021 Accepted: 31 May 2021
DOI: 10.1111/padm.12760
Public Admin. 2022;100:1125–1144. wileyonlinelibrary.com/journal/padm © 2021 John Wiley & Sons Ltd. 1125
政府付费的特征。政府之所以选择此类合同，则基于政治机
会主义与交易成本两个方面的考量。进一步，本文基于中国
2014–2016年PPP项目的数据，通过实证研究发现:地方主
政官员晋升压力越大，其短期拉动GDP增长的动机越强，
从而通过非特许经营合同上马的基建项目就越多；但是，项
目自身的复杂性会导致非特许经营合同在长期产生高昂的交
易成本，从而抑制地方政府上马此类项目。本研究将PPP的
研究视角从交易成本拓展到政治机会主义，从而更为全面地
阐述了新公共管理运动在转型国家更易遭遇挫折的原因。
1|INTRODUCTION
Public-private partnerships (PPPs) are an increasing aspect of the New Public Management (NPM) movement in the
delivery of infrastructure and public services across the world (Osborne, 2000). The government and the vendor
cooperate based on long-term contracts (10–30 years) to plan, design, finance, construct, and manage infrastructure
and public services that were traditionally undertaken by the government alone (Savas, 2000; Wang et al., 2017).
Extensive literature about the NPM movement has shown that the benefits include efficiency improvement, deficit
reduction, and public-choice increases (Elkomy et al., 2019; Reissner, 2019). However, recent literature claims that
the NPM practices frequently fail in developing and transitional economies, mainly due to their immature political
and legal systems (Bertelli et al., 2020). This research investigates how political issues in nondemocratic institution
cause the failures of China's PPPs.
PPPs have been booming in China since 2014. During 2014–2019, 13.93 trillion CNY (about 2.4 trillion USD) in
projects were procured, as shown in Figure 1(Ministry of Finance of China, 2020). However, the outcomes of
China's PPPs are unsatisfying and the problems seem common in other countries. For example, the government
bears demand risks through providing excessive government guarantees, some of which are up to 100% of produc-
tion capacity (Chuang et al., 2019); the government provides core services and the vendor is only responsible for
construction of facilities and delivery of noncore services, such as cleaning and laundry in the case of hospitals
0
500
1000
1500
2000
2500
3000
3500
0
1
2
3
4
5
6
2014 2015 2016 2017 2018 2019
Number of PPPs(right axis) Investment of PPPs(in trillion CNY,left axis)
FIGURE 1 The rise and fall of China's PPP projects during 2014–2019
1126 XIONG ET AL.
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