The Causal Impact of Exogenous Shocks on Public-Private Partnerships in Low- and Middle-Income Countries

This paper proposes a causal investigation into the adoption and sustainability of Public-Private Partnerships (PPPs) in low- and middle-income countries, addressing a significant gap in the literature that largely relies on correlational analysis. Leveraging the comprehensive World Bank’s Private Participation in Infrastructure (PPI) database (1990-2023), we employ quasi-experimental identification strategies to isolate the causal effects of exogenous shocks.

The primary strategy uses a Difference-in-Differences (DiD) framework to analyse the impact of externally imposed Structural Adjustment Programs (SAPs), viewing them as exogenous policy treatments. We hypothesise that SAPs, with their conditionalities for privatisation and economic reform, causally increase the number and value of PPP projects. This analysis will shed light on how external pressures fundamentally alter domestic public administration approaches to infrastructure procurement, often compelling PPP adoption beyond pure “value for money” considerations.

A complementary event study design examines the effect of major political transitions (e.g., regime changes) on PPP project sustainability. We anticipate that projects exposed to new governments, particularly those with differing ideological stances, will face a higher likelihood of renegotiation, distress, or cancellation. This segment of the research will empirically highlight the significant political risks inherent in long-term PPPs, underscoring the vulnerability of private capital to policy reversals.

Collectively, our anticipated findings will demonstrate that PPPs in developing contexts are not solely driven by rational economic choices but are significantly influenced by exogenous international pressures and domestic political dynamics. This research contributes to both public administration and economic theory by providing credible evidence on the political economy of PPPs, advocating for a policy focus that prioritises robust governance and stable institutional frameworks to ensure the long-term success and resilience of these critical infrastructure initiatives.