Do State Public-Private Partnership Enabling Laws Affect Investment in Infrastructure?

A growing number of U.S. states and localities are pursing private investment in transportation infrastructure through public-private partnerships (PPPs). As of late 2011, thirty states had enacted legislation enabling use of PPPs. This legislation clarifies such issues as the treatment of unsolicited PPP proposals, prior legislative approval of PPP contracts, and the mixing of public and private funds, among others. Using expert-weighting of thirteen key elements of PPP enabling laws, the authors develop an index reflecting the degree to which a state’s law is encouraging or discouraging of private investment. In previous work, they examined the factors that cause PPP enabling laws to be adopted, and that lead to more enabling laws. In this paper, the authors examine the effect of PPP enabling laws on the level of private infrastructure investment in a state. They control for a variety of factors in addition to the PPP laws in a state, and find that more favorable PPP enabling laws increases both design-build and more complex non-design build (mostly design-build-finance-operate) type of PPP contracts. They do not, however, find evidence that either more design-build projects or non-design-build projects reduces traffic congestion as measured by the travel-time index, eliminating a potentially important source of endogeneity.