The type of infrastructure for which PPPs have been used most – in Europe, developing countries, and the United States – is highways. In this chapter we answer the questions of when and how PPPs are appropriate for this particular kind of infrastructure.

Ideally, the best organizational form – whether traditional, PPP, or privatization – for providing a specific infrastructure should be determined by the project’s physical and economic characteristics. If political economy considerations are important – for example, opposition to privatization or to paying user fees – then the choice should reflect the interplay between these considerations and the technological and economic attributes of the infrastructure. What are the physical, technological, and economic characteristics of highways that determine whether they should be provided using public provision, PPPs, or privatization?

Physical and Economic Characteristics

Highway investments are large, sunk upfront, and long-lived. Interurban highways tend to be natural monopolies, while urban highways are usually part of a network. It follows that public intervention is justii ed, either to regulate tolls or to coordinate network planning and to oversee the intensive use of public space and rights-of-way. h is typically rules out privatization, so that the choice for most highways is between a PPP and traditional provision.