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Competition and Costs: Evidence from Competitive Tendering in the Scottish National Health Service

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  • Robin G. Milne
  • Robert E. Wright

Abstract

This paper estimates the impact of competitive tendering on cleaning costs in Scottish "National Health Service" hospitals. Unlike previous studies, which have relied on cross-sectional data, a five-year balanced panel of 176 hospitals is used to estimate a series of fixed effects regression models. These panel estimates suggest that previous studies have likely over-estimated the cost-savings associated with competitive tendering. The findings also suggest that the lower costs associated with competitive tendering have more to do with auction theory than with any intrinsic efficiency of the private sector. Copyright (c) Scottish Economic Society 2004.

Suggested Citation

  • Robin G. Milne & Robert E. Wright, 2004. "Competition and Costs: Evidence from Competitive Tendering in the Scottish National Health Service," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(1), pages 1-23, February.
  • Handle: RePEc:bla:scotjp:v:51:y:2004:i:1:p:1-23
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    References listed on IDEAS

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    1. AndréS GóMez-Lobo & Stefan Szymanski, 2001. "A Law of Large Numbers: Bidding and Compulsory Competitive Tendering for Refuse Collection Contracts," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(1), pages 105-113, February.
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    4. McMaster, Robert, 1995. "Competitive Tendering in UK Health and Local Authorities: What Happens to the Quality of Services?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 42(4), pages 409-427, November.
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    6. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-286, July.
    7. Henry Ohlsson, 2003. "Ownership and Production Costs: Choosing between Public Production and Contracting-Out in the Case of Swedish Refuse Collection," Fiscal Studies, Institute for Fiscal Studies, vol. 24(4), pages 451-476, December.
    8. Laffont, Jean-Jacques, 1997. "Game theory and empirical economics: The case of auction data 1," European Economic Review, Elsevier, vol. 41(1), pages 1-35, January.
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    10. Hendricks, Kenneth & Porter, Robert H & Boudreau, Bryan, 1987. "Information, Returns, and Bidding Behavior in OCS Auctions: 1954-1969," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 517-542, June.
    11. Domberger, Simon & Jensen, Paul, 1997. "Contracting Out by the Public Sector: Theory, Evidence, Prospects," Oxford Review of Economic Policy, Oxford University Press, vol. 13(4), pages 67-78, Winter.
    12. Ohlsson, Henry, 1996. "Ownership and input prices: A comparison of public and private enterprises," Economics Letters, Elsevier, vol. 53(1), pages 33-38, October.
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    14. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    15. Simon Domberger & Stephen Rimmer, 1994. "Competitive Tendering and Contracting in the Public Sector: A Survey," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(3), pages 439-453.
    16. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer.
    17. Klemperer, Paul, 1999. " Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-86, July.
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    Citations

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    Cited by:

    1. Luis Angeles & Robin G Milne, 2015. "Tracking cost savings from competitive tendering in the short and long run," Working Papers 2015_19, Business School - Economics, University of Glasgow.
    2. Angeles, Luis & Milne, Robin G., 2015. "Tracking cost savings from competitive tendering in the short and long run," SIRE Discussion Papers 2015-74, Scottish Institute for Research in Economics (SIRE).
    3. Andersson, Fredrik & Jordahl, Henrik, 2011. "Outsourcing Public Services: Ownership, Competition, Quality and Contracting," Working Papers 2011:20, Lund University, Department of Economics.
    4. Luis Angeles & Robin G. Milne‌, 2015. "Tracking cost savings from competitive tendering in the short and long run," Working Papers 2015_11, Business School - Economics, University of Glasgow.
    5. Angeles, Luis & Milne, Robin G., 2015. "Tracking cost savings from competitive tendering in the short and long run," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-74, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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