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Outsourcing Public Services: Contractibility, Cost, and Quality

Author

Listed:
  • Fredrik Andersson
  • Henrik Jordahl
  • Jens Josephson

Abstract

We review the literature on public sector outsourcing to explore if the theoretical predictions from the incomplete contracts literature hold up to recent empirical evidence. Guided by theory, we arrange services according to the type and magnitude of their contractibility problems. The empirical studies point at rather favourable outsourcing outcomes, in terms of costs and quality, for services without severe contracting problems. The picture is more mixed for services with tougher contracting problems, with the weight of the evidence in favour of public provision. This difference between services is largely in line with the property-rights framework and theories of incomplete contracts.

Suggested Citation

  • Fredrik Andersson & Henrik Jordahl & Jens Josephson, 2019. "Outsourcing Public Services: Contractibility, Cost, and Quality," CESifo Economic Studies, CESifo Group, vol. 65(4), pages 349-372.
    • Handle: RePEc:oup:cesifo:v:65:y:2019:i:4:p:349-372.
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifz009
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    Citations

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    Cited by:

    1. Niklas Potrafke, 2019. "Does Public Sector Outsourcing Decrease Public Employment? Empirical Evidence from OECD Countries," CESifo Economic Studies, CESifo Group, vol. 65(4), pages 464-484.
    2. Knutsson, Daniel & Tyrefors, Björn, 2020. "The Quality and Efficiency Between Public and Private Firms: Evidence from Ambulance Services," Working Paper Series 1365, Research Institute of Industrial Economics, revised 01 Jul 2021.
    3. Antonio Sánchez Soliño, 2019. "Sustainability of Public Services: Is Outsourcing the Answer?," Sustainability, MDPI, vol. 11(24), pages 1-12, December.
    4. Thomas Elston & Germà Bel & Han Wang, 2025. "The effect of inter‐municipal cooperation on social assistance programs: Evidence from housing allowances in England," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 44(3), pages 1060-1088, June.
    5. Elert, Niklas & Henrekson, Magnus, 2024. "Incentivizing Innovative Entrepreneurship in Quasi-Markets: Theory and Evidence from Sweden’s Schools and Nursing Homes," Working Paper Series 1489, Research Institute of Industrial Economics, revised 10 Jun 2025.
    6. Lazzarini,Sergio G., 2022. "The Right Privatization," Cambridge Books, Cambridge University Press, number 9781316519714, January.
    7. repec:ers:journl:v:xxiv:y:2021:i:3b:p:769-786 is not listed on IDEAS
    8. Elert, Niklas & Henrekson, Magnus, 2023. "The Profit Motive in the Classroom - Friend or Foe?," IZA Discussion Papers 16301, Institute of Labor Economics (IZA).
    9. repec:hpe:journl:y:2025:v:253:i:2:p:3-26 is not listed on IDEAS
    10. Isaria Kisoli & Wilfred Lameck, 2022. "Reconstructing the process of outsourcing solid waste management in Tanzania local government authorities," SN Business & Economics, Springer, vol. 2(8), pages 1-17, August.
    11. Krzysztof Jarosinski, 2021. "Cost-Effectiveness Analysis (CEA) of Public Investment Projects," European Research Studies Journal, European Research Studies Journal, vol. 0(3 - Part ), pages 769-786.

    More about this item

    Keywords

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    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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