Outsourcing, Market Structure and Elections
AbstractWe make a positive analysis of the impact of market structure and political preferences on a (local) government's decision to outsource public service using the framework of Hart, Shleifer and Vishny (1997). We argue that although outsourcing is more attractive when the privte market is competitive, the outsourcing decision will be the same in a competitive as in a monopolistic market. Second, we analyze how the price paid in a private monopoly market depends on how much the government cares about the benefits of the public service, and we provide conditions for when a "leftist, public service loving" politician outsources to a lower price. When this is the case and outsourcing is a salient issue in an election, the median voter prefers a more "leftist" government to be in charge of the outsourcing.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2003-05.
Length: 26 pages
Date of creation: Jun 2003
Date of revision:
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More information through EDIRC
privatization; outsourcing; incomplete contracts; market power; elections;
Other versions of this item:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
- L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General
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