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Contracting Out Public Service Provision to Not-For-Profit Firms

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Author Info
John Bennett
Elisabetta Iossa ()

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Abstract

In an incomplete contract setting, we analyze the contracting out of public service provision, comparing the performance of for-profit and not-for-profit private firms. Two institutional arrangements are considered, control rights lying either with the firm as under the UK’s Private Finance Initiative (PFI) or the government (as under traditional procurement). We derive the conditions under which provision by not-for-profit firms leads to greater investment and social benefit than provision by for profit firms. The role played by the non-distribution constraint in not-for profit firms and the nature of the investment are emphasized.

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Publisher Info
Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 05/124.

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Length: 28 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:bri:cmpowp:05/124

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Related research
Keywords: contracting out; not-for-profit firms; private finance initiative; public-private partnership; incomplete contracts; public service provision;

Other versions of this item:

Find related papers by JEL classification:
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Schmitz, Patrick W., 2000. "Partial Privatization and Incomplete Contracts: The Proper Scope of Government Reconsidered," MPRA Paper 13447, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  2. Hart, Oliver & Shleifer, Andrei & Vishny, Robert W, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1127-61, November.
    Other versions:
  3. Timothy Besley & Maitreesh Ghatak, 2001. "Government Versus Private Ownership Of Public Goods," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1343-1372, November. [Downloadable!] (restricted)
    Other versions:
  4. repec:rus:hseeco:124105 is not listed on IDEAS
  5. John Bennett & Elisabetta Iossa & Gabriella Legrenzi, 2003. "The Role of Commercial Non-profit Organizations in the Provision of Public Services," Oxford Review of Economic Policy, Oxford University Press, vol. 19(2), pages 335-347, Summer.
  6. Bilodeau, Marc & Slivinski, Al, 1996. "Volunteering nonprofit entrepreneurial services," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 117-127, October. [Downloadable!] (restricted)
  7. John Bennett & Elisabetta Iossa, 2004. "Building and Managing Facilities for Public Services," Public Policy Discussion Papers 02-08, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
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  8. Besley, Timothy J. & Ghatak, Maitreesh, 2004. "Competition and Incentives with Motivated Agents," CEPR Discussion Papers 4641, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Glaeser, Edward L. & Shleifer, Andrei, 2001. "Not-for-profit entrepreneurs," Journal of Public Economics, Elsevier, vol. 81(1), pages 99-115, July. [Downloadable!] (restricted)
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  10. Bos, Dieter & De Fraja, Gianni, 2002. "Quality and outside capacity in the provision of health services," Journal of Public Economics, Elsevier, vol. 84(2), pages 199-218, May. [Downloadable!] (restricted)
  11. Oliver Hart, 2002. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," The Centre for Market and Public Organisation 02/061, Department of Economics, University of Bristol, UK. [Downloadable!]
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  12. John Bennett & Elisabetta Iossa, 2005. "Contracting Out Public Service Provision to Not-For-Profit Firms," The Centre for Market and Public Organisation 05/124, Department of Economics, University of Bristol, UK. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Athias, Laure & Saussier, Stéphane, 2007. "Contractual flexibility or rigidity for public private partnerships? Theory and evidence from infrastructure concession contracts," MPRA Paper 10541, University Library of Munich, Germany. [Downloadable!]
  2. Nelarine Cornelius & Mathew Todres & Shaheena Janjuha-Jivraj & Adrian Woods & James Wallace, 2008. "Corporate Social Responsibility and the Social Enterprise," Journal of Business Ethics, Springer, vol. 81(2), pages 355-370, August. [Downloadable!] (restricted)
  3. John Bennett & Elisabetta Iossa, 2007. "Contracting Out Public Service Provision to Not-for-Profit Firms," CEDI Discussion Paper Series 07-08, Centre for Economic Development and Institutions(CEDI), Brunel University. [Downloadable!]
    Other versions:
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