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State Aid to Infrastructure: Do Competitively Selected Operators Obtain an Undue Advantage?

Author

Listed:
  • Phedon Nicolaides
  • Nadir Preziosi

    (Scuola di Dottorato in Scienze Umane e Sociali
    Director, Department of European Economic Studies, College of Europe (Bruges))

Abstract
This paper reviews several cases where the Commission presumed that competitively selected operators of large infrastructure projects derived an undue advantage from state aid. The aid was granted to the owners of the infrastructure to supported investment in construction or upgrading. The practice of the Commission is not consistent or clear. The paper also shows that under reasonable assumptions,competitive selection of operators is indeed capable of eliminating any advantage above market rates of return or market rates of cost of capital. The paper demonstrates, both theoretically and with the use of numerical examples, that concession fees take into account any aid that is granted to the owners of infrastructure for its construction or upgrading.

Suggested Citation

  • Phedon Nicolaides & Nadir Preziosi, 2015. "State Aid to Infrastructure: Do Competitively Selected Operators Obtain an Undue Advantage?," Bruges European Economic Research Papers 33, European Economic Studies Department, College of Europe.
  • Handle: RePEc:coe:wpbeer:33
    as

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    File URL: https://www.coleurope.eu/system/files_force/research-paper/beer33.pdf?download=1
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    More about this item

    Keywords

    State Aid; Competitive Selection; Auction Theory; Concession Fees; Funding Gap;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy

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