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Contracting welfare-to-work services: use and usefulness

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  • Pierre Koning

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Abstract

This paper contributes to the broad literature on public services contracting in two ways: We provide an empirical analysis of contracting decisions in the provision of welfare-to-work (WTW) services, and we explicitly model two forms of external provision of WTW services by municipalities. We estimate both the WTW-contracting decisions of Dutch municipalities and their impact on the performance, measured as the fraction of Social Assistance recipients. The two forms of external provision are (1) Contracting with other municipalities and/or (2) Contracting-out services to private providers. Our findings suggest that contracting decisions are predominantly driven by cost considerations, both for the decision to contract with other municipalities and the share of contracting out to private providers. Municipalities with low WTW budgets or facing budget constraints are more likely to contract with external parties – presumably this reduces their costs and the risk of future budget deficits. We do not find contracting decisions to affect the performance of municipalities, measured as the use, inflow or outflow out of the SA scheme. From this alone, however, we cannot conclude that both the three provision modes are equally cost-effective too, as external provision may be less costly.

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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 135.

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Date of creation: Nov 2009
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Handle: RePEc:cpb:discus:135

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Cited by:
  1. Faber, Riemer & Koning, Pierre, 2012. "Why Not Fully Spend a Conditional Block Grant?," IZA Discussion Papers 6712, Institute for the Study of Labor (IZA).
  2. Koning, Pierre & Heinrich, Carolyn J., 2010. "Cream-Skimming, Parking and Other Intended and Unintended Effects of Performance-Based Contracting in Social Welfare Services," IZA Discussion Papers 4801, Institute for the Study of Labor (IZA).

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