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Competition and Efficiency in Publicly Funded Services


  • Jens Lundsgaard


OECD countries gradually open the provision of publicly funded services to competition. This article sets out an analytical framework focusing on incentives and information asymmetries between government as a principal and the agents supplying publicly funded services, and reviews how these issues are addressed by different forms of competition. Taking a wide perspective across different publicly funded services, the article reviews to what extent and how OECD countries have introduced competition, and it seeks to compare and explain the differences based on service characteristics. This review covers education, childcare, long-term care for elderly and employment services. In such services used by individuals there can be benefits from letting users chooseamong alternative suppliers, but developing appropriate regulation shaping the incentives of users and suppliers is essential. Alternatively, competitive tendering and contracting can be used, as is frequently done in OECD countries in technical and support services, including in areas where the final services are supplied via a public monopoly. Private finance of infrastructure investment plays a minor role so far.

Suggested Citation

  • Jens Lundsgaard, 2003. "Competition and Efficiency in Publicly Funded Services," OECD Economic Studies, OECD Publishing, vol. 2002(2), pages 79-128.
  • Handle: RePEc:oec:ecokaa:5lmqcr2jj2lv

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    Cited by:

    1. Herwig Immervoll & David Barber, 2005. "Can Parents Afford to Work?: Childcare Costs, Tax-Benefit Policies and Work Incentives," OECD Social, Employment and Migration Working Papers 31, OECD Publishing.
    2. Jan Pavel & Emilia Sičáková-Beblavá, 2009. "Testing the Validity of the Brown-Potoski Model in the Czech and Slovak Republics," Prague Economic Papers, University of Economics, Prague, vol. 2009(4), pages 327-341.
    3. Mark Pearson & John P. Martin, 2005. "Should We Extend the Role of Private Social Expenditure?," OECD Social, Employment and Migration Working Papers 23, OECD Publishing.
    4. Valila, Timo, 2005. "How expensive are cost savings? On the economics of public-private partnerships," EIB Papers 4/2005, European Investment Bank, Economics Department.
    5. Elke J. Jahn & Wolfgang Ochel, 2005. "Contracting Out Temporary Help Services in Germany," CESifo Working Paper Series 1580, CESifo Group Munich.
    6. Ochel, Wolfgang, 2007. "Contracting out Employment Services Involving Temporary Agency Work in Germany," MPRA Paper 13820, University Library of Munich, Germany.
    7. Wolfgang Ochel, 2004. "Competitive Tendering and Contracting of Temporary Work Agencies in Germany," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2(2), pages 69-74, 07.

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