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Privatization and Quality: Evidence from Elderly Care in Sweden

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  • Spagnolo, Giancarlo
  • Johansson, Per
  • Bergman, Mats
  • Lundberg, Sofia

Abstract

Non-contractible quality dimensions are at risk of degradation when the provision of public services is privatized. However, privatization may increase quality by fostering performance-improving innovation, particularly if combined with increased competition. We assemble a large data set on elderly care services in Sweden between 1990 and 2009 and estimate how opening to private provision affected mortality rates ? an important and not easily contractible quality dimension ? using a difference-in-difference-in-difference approach. The results indicate that privatization and the associated increase in competition significantly improved non-contractible quality as measured by mortality rates. It also reduced the cost per resident, although left total cost unaffected.

Suggested Citation

  • Spagnolo, Giancarlo & Johansson, Per & Bergman, Mats & Lundberg, Sofia, 2014. "Privatization and Quality: Evidence from Elderly Care in Sweden," CEPR Discussion Papers 9939, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9939
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    8. Beatriz Cuadrado-Ballesteros & Noemí Peña-Miguel, 2018. "The Socioeconomic Consequences of Privatization: An Empirical Analysis for Europe," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(1), pages 163-183, August.
    9. Bloom, David & Kotschy, Rainer, 2022. "A Comparative Perspective on Long-Term Care Systems," CEPR Discussion Papers 17213, C.E.P.R. Discussion Papers.
    10. Sofia Lundberg & Per-Olov Marklund, 2018. "Green public procurement and multiple environmental objectives," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(1), pages 37-53, March.
    11. Elert, Niklas & Henrekson, Magnus & Stenkula, Mikael, 2017. "Institutional Reform for Innovation and Entrepreneurship: An Agenda for Europe," Working Paper Series 1150, Research Institute of Industrial Economics, revised 16 Feb 2017.
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    14. Gerdes, Christer, 2015. "Does Performance Information Affect Job Seekers in Selecting Private Providers in Voucher-Based ALMP Programs?," IZA Discussion Papers 8992, Institute of Labor Economics (IZA).
    15. Bucciol, Alessandro & Camboni, Riccardo & Valbonesi, Paola, 2020. "Purchasing medical devices: The role of buyer competence and discretion," Journal of Health Economics, Elsevier, vol. 74(C).
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    More about this item

    Keywords

    Competition; Incomplete contracts; Limited enforcement; Mortality; Nursing homes; Outsourcing; Performance measurement; Privatization; Procurement; Public services;
    All these keywords.

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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