When does a public–private partnership (PPP) lead to inefficient cost management? Evidence from South Korea’s urban rail system

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Abstract

This paper investigates the impact of a public–private partnership (PPP) on the operational cost-efficiency of South Korea’s urban rail system. Seoul’s line 9, which is operated by a PPP, was compared with Seoul Metropolitan Rapid Transit (SMRT) which is entirely run by the public sector. Overall, no evidence was found that private operation led to clear and significant declines in costs to the public. Private shareholders, on the other hand, experienced a surprisingly high rate of return. The author explains why two characteristics defining a typical PPP—activity bundling and public–private risk-sharing—were behind this unintended outcome and makes suggestions to prevent other governments experiencing similar problems.

Original languageEnglish
Pages (from-to)447-454
Number of pages8
JournalPublic Money and Management
Volume36
Issue number6
DOIs
Publication statusPublished - 2016 Sep 18

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shareholder
costs
management
evidence
public sector
efficiency
Cost management
Rail
Public-private partnerships
Public sector
Rate of return
Costs
Bundling
Shareholders
Government

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Sociology and Political Science
  • Public Administration

Cite this

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