Fiscal Pressure and Public–Private Partnership Investment: Based on Evidence from Prefecture-Level Cities in China

Abstract

Public–private partnership (PPP) policy is essential to alleviating the local government debt burden and improving resource allocation efficiency. This paper empirically examines the impact of fiscal pressure on PPP investment in Chinese prefecture-level cities from 2014 to 2019 using the ordinary least-squares (OLS) module. Moreover, we also investigate how fiscal pressure influences PPP investment and test the influenced mechanism from other perspectives. The results show the following. (1) Fiscal pressure on the government has a significant positive effect on PPP investment at the prefectural level. (2) The marketization process is the mediated effect of the relationship between fiscal pressure and PPP investment. Fiscal pressure will stimulate the regional marketization process, thus promoting PPP investment. (3) Fiscal pressure has a significant positive effect on PPP investment in the middle region, while the effect is not significant in the eastern and western regions. Meanwhile, the effect is not significant in central cities, but there is a significant positive effect in ordinary cities. (4) The effect of fiscal pressure on PPP investment is not significant in the private reward mode of government payment, but there is a significant positive effect in the mode of user payment and feasibly insufficient subsidies. Our studies could also provide practical suggestions for sustainable development of PPP policy and solving the fiscal pressure of the current economic recession under the COVID-19 pandemic.

Institutional quality, economic development, and the sustainable outcomes of PPP projects: An empirical analysis of failed PPP projects in China from 2014 to 2020

“…PPP projects typically involve long-term collaborations and significant fixed-asset investments. Therefore, the willingness of private capital to invest (PI) , employ (PE) , and the ability to access favorable financing conditions (FI) are critical factors that reflect the local environment for private capital development [ 36 , 37 ].…”

Understanding the historical processes of privatization policies in North Africa: Lessons from the cases of Algeria, Morocco and Tunisia

“…This lens provides a deeper understanding of how macroeconomic factors contribute to the success or failure of privatization initiatives. Economic stability, fiscal policies, and the overall health of national economies become crucial determinants (Gong et al, 2022). For instance, during economic downturns, the urgency of demands for privatization may intensify as governments seek to alleviate fiscal pressures.…”

“…Kay and Thompson (1986) critically evaluated the rationale behind privatization, questioning its policy foundations and stimulating a thoughtful reflection on the motivations driving this economic strategy. More recently, Gong et al (2022) contributed a contemporary dimension by exploring the impact of fiscal pressure on public-private partnership investments in Chinese cities, providing valuable insights into the economic considerations influencing privatization initiatives. Together, these works form a multifaceted theoretical framework that enhances our grasp of privatization dynamics, considering economic, institutional, and policy dimensions (Kay and Thompson, 1986).…”

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