Public-private partnerships and economic growth: A sectoral analysis from developing countries

Governments, particularly in developing countries, are continuously faced with the challenge of expanding infrastructure to keep up with population growth and rapid urbanisation. This challenge arises from the fact that public resources are strained as governments face high budget deficits and rising debt-to-GDP ratios. At the same time, development institutions alone have not succeeded in narrowing this financing gap. The constraints placed on the budgetary requirements of governments have shifted attention to public and private partnerships in financing infrastructure projects, which are at the heart of service delivery in developing countries. Whilst the use of Public–Private Partnership (PPPs) is a growing trend in developing countries, there is limited empirical studies that have assessed the impact of PPP investments on economic growth. This article, therefore, extends the limitations in the literature by investigating the effect of PPP sectoral investments on economic growth among 35 developing countries from 1997 to 2018 within the neoclassical growth framework. Using the system GMM estimation technique, we find aggregate PPP investment and energy investment to positively contribute to economic growth, which highlights the multiplier effect of energy in stimulating economic growth in developing economies. The policy implications of the findings are discussed.