IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Outsourcing Public Services: Ownership, Competition, Quality and Contracting

We survey the literature on the effects of public sector outsourcing. Guided by theory, we systematically arrange services according to the type and magnitude of their contractibility problems. Taken as a whole, the empirical literature indicates that public sector outsourcing generally reduces costs without hurting quality. This is clearly the case for “perfectly contractible services” like garbage collection, but outsourcing often seems to work reasonably well also for some services with more difficult contracting problems, e.g. fire protection and prisons. Outsourcing seems to be more problematic for credence goods, with residential youth care as the prime example. In contrast to previous reviews, we conclude that ownership and competition appear to be about equally important for the consequences of public sector outsourcing.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ifn.se/wfiles/wp/wp874.pdf
Download Restriction: no

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 874.

as
in new window

Length: 36 pages
Date of creation: 16 Jun 2011
Date of revision:
Handle: RePEc:hhs:iuiwop:0874
Contact details of provider: Postal:
Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Ohlsson, H., 1998. "Ownership and Production Costs Choosing Between Public Production and Contracting Out," Papers 1998-6, Uppsala - Working Paper Series.
  2. Propper, C & Bloom, N & Seiler, S & Van Reenen, J, 2013. "The impact of competition on management quality: evidence from public hospitals," Working Papers 5915, Imperial College, London, Imperial College Business School.
  3. Giuseppe Nicoletti & Stefano Scarpetta, 2003. "Regulation, Productivity and Growth: OECD Evidence," OECD Economics Department Working Papers 347, OECD Publishing.
  4. Andersson, Fredrik, 2009. "Make-or-buy Decisions and the Manipulability of Performance Measures," Working Paper Series 815, Research Institute of Industrial Economics.
  5. Kelly Bedard & H. E. Frech, 2009. "Prison health care: is contracting out healthy?," Health Economics, John Wiley & Sons, Ltd., vol. 18(11), pages 1248-1260.
  6. Eggleston, Karen, 2008. "Soft budget constraints and the property rights theory of ownership," Economics Letters, Elsevier, vol. 100(3), pages 425-427, September.
  7. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
  8. Domberger, S & Meadowcroft, S & Thompson, D J, 1986. "Competitive tendering and efficiency: the case of refuse collection," Fiscal Studies, Institute for Fiscal Studies, vol. 7(4), pages 69-87, November.
  9. Hermalin, Benjamin E & Katz, Michael L, 1991. "Moral Hazard and Verifiability: The Effects of Renegotiation in Agency," Econometrica, Econometric Society, vol. 59(6), pages 1735-53, November.
  10. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  11. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, 06.
  12. David Martimort & Jérôme Pouyet, 2008. "To build or not to build: Normative and positive theories of public-private partnerships," Post-Print halshs-00754298, HAL.
  13. 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 1454-70, November.
  14. 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, 02.
  15. Gregory Lewis & Patrick Bajari, 2011. "Procurement Contracting With Time Incentives: Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1173-1211.
  16. Stevens, Barbara J, 1978. "Scale, Market Structure, and the Cost of Refuse Collection," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 438-48, August.
  17. Bayer, Patrick & Pozen, David E, 2005. "The Effectiveness of Juvenile Correctional Facilities: Public versus Private Management," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 549-89, October.
  18. Domberger, S & Meadowcroft, S & Thompson, D, 1987. "The impact of competitive tendering on the costs of hospital domestic services," Fiscal Studies, Institute for Fiscal Studies, vol. 8(4), pages 39-54, November.
  19. 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.
  20. José Manuel González-Páramo & Pablo Hernández Cos, 2005. "The Impact of Public Ownership and Competition on Productivity," Kyklos, Wiley Blackwell, vol. 58(4), pages 495-517, November.
  21. Oliver Hart, 2003. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," Economic Journal, Royal Economic Society, vol. 113(486), pages C69-C76, March.
  22. John Bennett & Elisabetta Iossa, 2004. "Building and Managing Facilities for Public Services," Public Policy Discussion Papers 02-08, Economics and Finance Section, School of Social Sciences, Brunel University.
  23. Gregg, Paul & Grout, Paul A. & Ratcliffe, Anita & Smith, Sarah & Windmeijer, Frank, 2011. "How important is pro-social behaviour in the delivery of public services?," Journal of Public Economics, Elsevier, vol. 95(7), pages 758-766.
  24. E. Dijkgraaf & R. H. J. M. Gradus, 2007. "Fair competition in the refuse collection market?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(10), pages 701-704.
  25. Sanford J Grossman & Oliver D Hart, 2001. "An Analysis of the Principal-Agent Problem," Levine's Working Paper Archive 391749000000000339, David K. Levine.
  26. Edward L. Glaeser & Andrei Shleifer, 1998. "Not-For-Profit Entrepreneurs," Harvard Institute of Economic Research Working Papers 1852, Harvard - Institute of Economic Research.
  27. Owen Thompson, 2011. "The estimated cost impact of privatizing student transportation in Minnesota school districts," Public Choice, Springer, vol. 146(3), pages 319-339, March.
  28. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
  29. Oliver Hart & Andrei Shleifer & Robert Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," Harvard Institute of Economic Research Working Papers 1778, Harvard - Institute of Economic Research.
  30. Stefan Szymanski, 1996. "The impact of compulsory competitive tendering on refuse collection services," Fiscal Studies, Institute for Fiscal Studies, vol. 17(3), pages 1-19, August.
  31. Bennmarker, Helge & Grönqvist, Erik & Öckert, Björn, 2009. "Effects of outsourcing employment services: evidence from a randomized experiment," Working Paper Series 2009:23, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  32. Martin Gaynor & Rodrigo Moreno-Serra & Carol Propper, 2013. "Death by Market Power: Reform, Competition, and Patient Outcomes in the National Health Service," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 134-66, November.
  33. Christopher M. Snyder & Robert P. Trost & R. Derek Trunkey, 2001. "Reducing Government Spending With Privatization Competitions: A Study Of The Department Of Defense Experience," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 108-117, February.
  34. Atif Mian, 2008. "Incentives in Markets, Firms, and Governments," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(2), pages 273-306, October.
  35. Robert McGuire & T. COTT, 1984. "Public versus private economic activity: A new look at school bus transportation," Public Choice, Springer, vol. 43(1), pages 25-43, January.
  36. Paul Klemperer, 2001. "How (Not) to Run Auctions: The European 3G Telecom Auctions," Economics Series Working Papers 2002-W05, University of Oxford, Department of Economics.
  37. Ann P. Bartel & Ann E. Harrison, 2005. "Ownership Versus Environment: Disentangling the Sources of Public-Sector Inefficiency," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 135-147, February.
  38. Klaus M. Schmidt, 1995. "Incomplete Contracts and Privatization," Discussion Paper Serie A 480, University of Bonn, Germany.
  39. Blom-Hansen, Jens, 2003. "Is Private Delivery of Public Services Really Cheaper? Evidence from Public Road Maintenance in Denmark," Public Choice, Springer, vol. 115(3-4), pages 419-38, June.
  40. Domberger, S & Meadowcroft, S & Thompson, D, 1988. "Competition and efficiency in refuse collection : a reply," Fiscal Studies, Institute for Fiscal Studies, vol. 9(1), pages 86-90, February.
  41. Nuria Bosch Roca & Francisco Pedraja & Javier Suarez Pandiello, 1999. "Measuring the efficiency in spanish municipal refuse collection services," Working Papers in Economics 46, Universitat de Barcelona. Espai de Recerca en Economia.
  42. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
  43. Paul H. Jensen & Robin E. Stonecash, 2005. "Incentives and the Efficiency of Public Sector-outsourcing Contracts," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 767-787, December.
  44. Jonathan Levin & Steven Tadelis, 2010. "CONTRACTING FOR GOVERNMENT SERVICES: THEORY AND EVIDENCE FROM U.S. CITIES -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 507-541, 09.
  45. Bulow, Jeremy & Klemperer, Paul, 1996. "Auctions versus Negotiations," American Economic Review, American Economic Association, vol. 86(1), pages 180-94, March.
  46. E. Dijkgraaf & R. Gradus, 2003. "Cost Savings of Contracting Out Refuse Collection," Empirica, Springer, vol. 30(2), pages 149-161, June.
  47. Eytan Sheshinski & Luis F. López-Calva, 2003. "Privatization and Its Benefits: Theory and Evidence," CESifo Economic Studies, CESifo, vol. 49(3), pages 429-459.
  48. Patrick Francois & Michael Vlassopoulos, 2008. "Pro-social Motivation and the Delivery of Social Services," CESifo Economic Studies, CESifo, vol. 54(1), pages 22-54, March.
  49. Paul A. Grout & Margaret Stevens, 2003. "The Assessment: Financing and Managing Public Services," Oxford Review of Economic Policy, Oxford University Press, vol. 19(2), pages 215-234, Summer.
  50. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
  51. Henrik Christoffersen & Martin Paldam & Allan Würtz, 2007. "Public versus private production and economies of scale," Public Choice, Springer, vol. 130(3), pages 311-328, March.
  52. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
  53. Canice Prendergast, 2003. "The Limits of Bureaucratic Efficiency," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 929-958, October.
  54. Gupta, Nandini & Ham, Jhon C. & Svejnar, Jan, 2008. "Priorities and sequencing in privatization: Evidence from Czech firm panel data," European Economic Review, Elsevier, vol. 52(2), pages 183-208, February.
  55. Robin Milne & Magnus McGee, 1992. "Compulsory competitive tendering in the NHS: a new look at some old estimates," Fiscal Studies, Institute for Fiscal Studies, vol. 13(3), pages 96-111, August.
  56. Ohlsson, Henry, 1996. "Ownership and input prices: A comparison of public and private enterprises," Economics Letters, Elsevier, vol. 53(1), pages 33-38, October.
  57. Sandro Cabral & Sergio Lazzarini & Paulo Azevedo, 2010. "Private operation with public supervision: evidence of hybrid modes of governance in prisons," Public Choice, Springer, vol. 145(1), pages 281-293, October.
  58. 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, vol. 18(1), pages 105-113, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hhs:iuiwop:0874. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisabeth Gustafsson)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.