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Contracting out the Last-Mile of Service Delivery: Subsidized Food Distribution in Indonesia

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  • Olken, Benjamin
  • Banerjee, Abhijit
  • Hanna, Rema
  • Kyle, Jordan
  • Sumarto, Sudarno

Abstract

Should government service delivery be outsourced to the private sector? In a randomized field experiment across 572 Indonesian localities, we show that allowing for outsourcing reduced the operating costs of a subsidized food program without sacrificing quality. However, citizens only reaped the gains from efficiency in terms of lower prices in areas where we exogenously increased the level of competition in the bidding process. We find that while the selection among bids during the procurement process appears broadly sensible, elites were sometimes able to block the process entirely, either ex-ante or ex-post, limiting the magnitude of the gains from outsourcing.

Suggested Citation

  • Olken, Benjamin & Banerjee, Abhijit & Hanna, Rema & Kyle, Jordan & Sumarto, Sudarno, 2017. "Contracting out the Last-Mile of Service Delivery: Subsidized Food Distribution in Indonesia," CEPR Discussion Papers 11857, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11857
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    Cited by:

    1. Kyle, Jordan, 2017. "Local corruption and support for fuel subsidy reform: Evidence from Indonesia," IFPRI discussion papers 1620, International Food Policy Research Institute (IFPRI).
    2. Dhaliwal, Iqbal & Hanna, Rema, 2017. "The devil is in the details: The successes and limitations of bureaucratic reform in India," Journal of Development Economics, Elsevier, vol. 124(C), pages 1-21.
    3. Patrice Ollivaud, 2017. "Improving the allocation and efficiency of public spending in Indonesia," OECD Economics Department Working Papers 1381, OECD Publishing.
    4. Lin, J. & Z. & Zhang, Z., 2018. "Does transportation matter to tobacco leaf producers? Evidence from Guizhou, China," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276998, International Association of Agricultural Economists.
    5. Chintapalli, Prashant, 2023. "Optimal multi-period crop procurement and distribution policy with minimum support prices," Socio-Economic Planning Sciences, Elsevier, vol. 89(C).

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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