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Does Privatising Public Service Provision Reduce Accountability?

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Author Info
Matthew Ellman

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Abstract

This paper studies how privatising service provision (shifting control rights and contractual obligations to providers) affects accountability. There are two main effects. (1) Privatisation demotivates governments from investigating and responding to public demands, since providers then hold up service adaptations. (2) Privatisation demotivates the public from mobilising to pressure for service adaptations, since providers then indirectly holdup the public by inflating the government’s cost of implementing these adaptations. So, when choosing governance mode, politicians may be biased towards privatising as a way to escape public attention; relatedly, privatising utilities may reduce public pressure and increase consumer prices.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 997.

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Date of creation: Oct 2006
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Handle: RePEc:upf:upfgen:997

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Public Services; Privatisation; Voter Mobilisation; Accountability; Government Responsiveness; Contract Length; Incomplete Contracts; Holdup;

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Timothy Besley & Robin Burgess, 2002. "The Political Economy Of Government Responsiveness: Theory And Evidence From India," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1415-1451, November. [Downloadable!] (restricted)
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  2. Timothy Besley & Stephen Coate, 2003. "Elected Versus Appointed Regulators: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1176-1206, 09. [Downloadable!] (restricted)
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  3. Klaus M. Schmidt, 1990. "The Costs and Benefits of Privatization," Discussion Paper Serie A 287, University of Bonn, Germany.
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  4. Hart, Oliver & Shleifer, Andrei & Vishny, Robert W, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1127-61, November.
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  5. Bennedsen, Morten, 2000. "Political ownership," Journal of Public Economics, Elsevier, vol. 76(3), pages 559-581, June. [Downloadable!] (restricted)
  6. John Kwoka, 2005. "The comparative advantage of public ownership: evidence from U.S. electric utilities," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 622-640, May. [Downloadable!] (restricted)
  7. Anke S. Kessler & Christoph Lülfesmann, 2001. "Monitoring and Productive Efficiency in Public and Private Firms," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(2), pages 167-, February.
  8. Besley, Timothy & Burgess, Robin, 2001. "Political agency, government responsiveness and the role of the media," European Economic Review, Elsevier, vol. 45(4-6), pages 629-640, May. [Downloadable!] (restricted)
  9. Eric Maskin & Jean Tirole, 2004. "The Politician and the Judge: Accountability in Government," American Economic Review, American Economic Association, vol. 94(4), pages 1034-1054, September. [Downloadable!]
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  10. Laffont, Jean-Jacques & Tirole, Jean, 1991. "Privatization and Incentives," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 84-105, Special I.
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  11. John E. Kwoka, Jr., 2002. "Governance Alternatives and Pricing in the U.S. Electric Power Industry," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 278-294, April.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Athias, Laure, 2007. "Political accountability, incentives, and Contractual design of public private partnerships," MPRA Paper 10538, University Library of Munich, Germany, revised 11 Mar 2009. [Downloadable!]
  2. Bennedsen, Morten / Schultz, Christian, 2007. "Arm’s Length Provision of Public Services," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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This page was last updated on 2009-11-6.

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