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Arm's length delegation of public services

Author

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  • Bennedsen, Morten
  • Schultz, Christian

Abstract

Delegation is a key feature of political decision making: Mayors or prime ministers delegate to subordinates, voters delegate to elected representatives. We analyze the effect of political delegation on public service provision and the choice between private or public providers when contracts are incomplete and incentives therefore distorted. We identify two important effects: The incentive effect increases the incentive part of service providers' remuneration and delegation may therefore be a substitute for an explicit complete incentive contract. The bargaining effect improves the bargaining position vis a vis a private firm with market power. In general, these effects imply that delegation improves public service provision.

Suggested Citation

  • Bennedsen, Morten & Schultz, Christian, 2011. "Arm's length delegation of public services," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 543-552, August.
  • Handle: RePEc:eee:pubeco:v:95:y:2011:i:7-8:p:543-552
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    Cited by:

    1. Eva-Cristina Petrescu & Diana-Eugenia Ioncic─â, 2012. "Perception of Private and Public Medical Services In Romania," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 14(Special N), pages 653-664, November.

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