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When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services

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  • Blank, Rebecca M

Abstract

The privatisation of social services is being increasingly discussed. The social services market is characterised by multiple market failures, including informational asymmetries, agency problems, externalities, and distributional concerns. Consumers may care as much or more about quality of services than about price. If quality is readily observable, the government can regulate private providers to assure standards are met. But when standards are difficult to observe or when the recipient is not the agent who makes the decisions, government ownership may be preferable. This paper categorises the market situations in which government provision of social services is likely to be most versus least attractive.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 110 (2000)
Issue (Month): 462 (March)
Pages: C34-49

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Handle: RePEc:ecj:econjl:v:110:y:2000:i:462:p:c34-49

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  1. Henry M. Levin, 1998. "Educational vouchers: Effectiveness, choice, and costs," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 17(3), pages 373-392.
  2. Greenwald, Bruce C & Stiglitz, Joseph E, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 229-64, May.
  3. Andrei Shleifer, 1998. "State versus Private Ownership," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 133-150, Fall.
  4. David E. M. Sappington & Joseph E. Stiglitz, 1987. "Privatization, information and incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(4), pages 567-585.
  5. Henry Hansmann, 1996. "The Changing Roles of Public, Private, and Nonprofit Enterprise in Education, Health Care, and Other Human Services," NBER Chapters, in: Individual and Social Responsibility: Child Care, Education, Medical Care, and Long-Term Care in America, pages 245-276 National Bureau of Economic Research, Inc.
  6. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," NBER Working Papers 5744, National Bureau of Economic Research, Inc.
  7. Vining, Aidan R & Boardman, Anthony E, 1992. " Ownership versus Competition: Efficiency in Public Enterprise," Public Choice, Springer, vol. 73(2), pages 205-39, March.
  8. Tobin, James, 1970. "On Limiting the Domain of Inequality," Journal of Law and Economics, University of Chicago Press, vol. 13(2), pages 263-77, October.
  9. James M. Poterba, 1996. "Government Intervention in the Markets for Education and Health Care: How and Why?," NBER Chapters, in: Individual and Social Responsibility: Child Care, Education, Medical Care, and Long-Term Care in America, pages 277-308 National Bureau of Economic Research, Inc.
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Cited by:
  1. Koning, Pierre, 2012. "Contracting welfare-to-work services," Economics Letters, Elsevier, vol. 114(3), pages 349-352.
  2. Argentino Pessoa, 2008. "Educational Reform in Developing Countries: Private Involvement and Partnerships," FEP Working Papers 284, Universidade do Porto, Faculdade de Economia do Porto.
  3. Juan F. Jimeno, . "Incentivos y desigualdad en el sistema español de pensiones contributivas de jubilación," Working Papers 2002-13, FEDEA.
  4. Suho Bae, 2010. "Public Versus Private Delivery Of Municipal Solid Waste Services: The Case Of North Carolina," Contemporary Economic Policy, Western Economic Association International, vol. 28(3), pages 414-428, 07.
  5. Pierre Koning & C.J. Heinrich, 2009. "Cream-skimming, parking and other intended and unintended effects of performance-based contracting in social welfare services," CPB Discussion Paper 134, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Argentino Pessoa, 2009. "Outsourcing And Public Sector Efficiency: How Effective Is Outsourcing In Dealing With Impure Public Goods?," FEP Working Papers 329, Universidade do Porto, Faculdade de Economia do Porto.
  7. Pearson, Mark & Martin, John P., 2005. "Should We Extend the Role of Private Social Expenditure?," IZA Discussion Papers 1544, Institute for the Study of Labor (IZA).
  8. Maurizio Pugno, 2003. "The service paradox and endogenous economic growth," Department of Economics Working Papers 0301, Department of Economics, University of Trento, Italia.
  9. Felipe Barrera-Osorio & Mauricio Olivera & Carlos Ospino, 2009. "Does Society Win or Lose as a Result of Privatization? The Case of Water Sector Privatization in Colombia," Economica, London School of Economics and Political Science, vol. 76(304), pages 649-674, October.
  10. Juan F. Jimeno, . "El sistema de pensiones contributivas en España: Cuestiones básicas y perspectivas en el medio plazo," Working Papers 2000-15, FEDEA.
  11. Mauricio Olivera & Felipe Barrera, 2007. "La sociedad gana o pierde como resultado de la privatizacion? El caso de Colombia," Research Department Publications 3231, Inter-American Development Bank, Research Department.
  12. Rebecca M. Blank, 2002. "Can Equity and Efficiency Complement Each Other?," NBER Working Papers 8820, National Bureau of Economic Research, Inc.

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