Outsourcing And Public Sector Efficiency: How Effective Is Outsourcing In Dealing With Impure Public Goods?
AbstractThe debate on new public management, together with the shortage of public funds, has had a considerable impact on public administration. Accordingly, many governments have searched positive impacts on the efficiency, equity and quality provision of public services through increasing competition and active participation of the private sector, considering outsourcing as the appropriate instrument to attain such endeavor. However, private involvement in public services provision is controversial. While, on the one hand it is touted as a way to increase efficiency and accountability by turning over choices to individuals in the market place, on the other hand, some argue that it has the potential to produce considerable fraud and corruption if managerial control by the public sector is weak. So, given this context, we aim to assess the private involvement in public services in efficiency terms, putting aside ideological considerations. So, after the introduction, we present a definition of public goods and we characterize their different types, with particular emphasis on “impure” public goods. Section 3, focuses on market failures together with equity considerations as the main reasons that configure the role of the public sector in providing impure public goods, as well as on the possibility of government failures. Section 4 deals with the benefits and costs of outsourcing in the public sector. Section 5 describes the most frequent forms of private sector involvement in the provision of impure public goods, as well as the advantages and disadvantages of the different options. Section 6 carries out some comments on the need for regulation. Finally, section 7 concludes.
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Bibliographic InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 329.
Length: 30 pages
Date of creation: Jul 2009
Date of revision:
Contracting out; impure public goods; market/government failures; private sector involvement; public sector;
Find related papers by JEL classification:
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-28 (All new papers)
- NEP-PBE-2009-07-28 (Public Economics)
- NEP-PUB-2009-07-28 (Public Finance)
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