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Delegation of Contracting in the Private Provision of Public Services

  • Elisabetta Iossa

    ()

We use an incomplete-contract approach to compare contracting out by a public sector agency with the delegation of contracting out to a public-private partnership (PPP) that is a joint venture between private and sector agents. The PPP maximizes a linear combination of profit and social benefit. Such delegation may be desirable to curb innovations that reduce the cost of provision but also reduce social benefit. Delegation may be undesirable for innovations that increase social benefit but also raise costs. Our results are explained in terms of the shadow cost of public funds and the negotiating stance of the PPP.

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File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp125.pdf
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Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 05/125.

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Length: 22 pages
Date of creation: Apr 2005
Date of revision:
Handle: RePEc:bri:cmpowp:05/125
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  1. Bos, Dieter & De Fraja, Gianni, 2002. "Quality and outside capacity in the provision of health services," Journal of Public Economics, Elsevier, vol. 84(2), pages 199-218, May.
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  10. Patrick W. Schmitz, 2000. "Partial Privatization and Incomplete Contracts: The Proper Scope of Government Reconsidered," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(4), pages 394-411, August.
  11. J. Luis Guasch & Jean-Jacques Laffont & Stephane Straub, 2004. "Renegotiation of Concession Contracts in Latin America," ESE Discussion Papers 103, Edinburgh School of Economics, University of Edinburgh.
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