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

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  • John Bennett
  • Elisabetta Iossa

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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Bibliographic Info

Paper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Economics and Finance Discussion Papers with number 05-14.

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Length: 29 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:bru:bruedp:05-14

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Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK

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References

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  1. JOhn Bennett & Elisabetta Iossa, 2005. "Building and Managing Facilities for Public Services," The Centre for Market and Public Organisation 05/137, Department of Economics, University of Bristol, UK.
  2. Glaeser, Edward L. & Shleifer, Andrei, 2001. "Not-for-profit entrepreneurs," Journal of Public Economics, Elsevier, vol. 81(1), pages 99-115, July.
  3. Besley, Timothy J. & Ghatak, Maitreesh, 2001. "Government versus Private Ownership of Public Goods," CEPR Discussion Papers 2725, C.E.P.R. Discussion Papers.
  4. Bilodeau, Marc & Slivinski, Al, 1996. "Volunteering nonprofit entrepreneurial services," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 117-127, October.
  5. 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.
  6. Timothy Besley & Maitreesh Ghatak, 2003. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 2202, London School of Economics and Political Science, LSE Library.
  7. 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.
  8. 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.
  9. Schmitz, Patrick W., 2000. "Partial Privatization and Incomplete Contracts: The Proper Scope of Government Reconsidered," MPRA Paper 13447, University Library of Munich, Germany.
  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.
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Cited by:
  1. Elisabetta Iossa & David Martimort, 2012. "Risk allocation and the costs and benefits of public--private partnerships," RAND Journal of Economics, RAND Corporation, vol. 43(3), pages 442-474, 09.
  2. John Bennett & Elisabetta Iossa, 2004. "Contracting Out Public Service Provision to Non-for-profit Firms," Economics and Finance Discussion Papers 04-12, Economics and Finance Section, School of Social Sciences, Brunel University.
  3. 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.
  4. 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.

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