Public-private partnership for the provision of public goods : theory and an application to NGOs

This paper analyzes the role of public and private responsibility in the provision of public goods. We emphasize that a typical public good will require many different inputs which raises the possibility of partnerships to exploit comparative advantages of different parties. But hold-up problems due to contractual incompleteness in specifying tasks discourage separation of ownership and management. We extend our analysis to examine the role of project design or “ideology” as a separate non-contractible input, and the possibility of crowding out in the form of a less caring government being elected because of the presence of private providers. The main application developed here is to NGOs in developing countries which, in the last two decades, have been increasingly involved in various capacities in the provision of a wide range of public goods and services.