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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. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, pages 3-22.
    2. 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.
    3. Kenneth Hendricks & Harry J. Paarsch, 1995. "A Survey of Recent Empirical Work Concerning Auctions," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 403-426, May.
    4. Rudolf Avenhaus & John Fichtner & Steven J. Brams & D. Marc Kilgour, 1989. "The Probability of Nuclear War," Journal of Peace Research, Peace Research Institute Oslo, pages 91-99.
    5. 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.
    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, pages 451-476.
    8. Domberger, Simon & Hall, Christine & Li, Eric Ah Lik, 1995. "The Determinants of Price and Quality in Competitively Tendered Contracts," Economic Journal, Royal Economic Society, vol. 105(433), pages 1454-1470, November.
    9. Ohlsson, Henry, 1998. "Ownership and Production Costs - Choosing Between Public Production and Contracting Out," Working Paper Series 1998:6, Uppsala University, Department of Economics.
    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. 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.
    12. 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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    Cited by:

    1. Andersson, Fredrik & Jordahl, Henrik, 2011. "Outsourcing Public Services: Ownership, Competition, Quality and Contracting," Working Papers 2011:20, Lund University, Department of Economics.
    2. 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.
    3. 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.
    4. 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).
    5. 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).

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