Should We Extend the Role of Private Social Expenditure?
Some people make great claims about the advantages to be gained from greater reliance on the private sector for the provision of social protection. Many of the claims for great macroeconomic advantages do not stand up to scrutiny. However, there is some reason to hope that private provision might promote microeconomic efficiency and services which are more responsive to consumer preferences than those provided by a single monopoly public sector provider. Drawing on examples from recent OECD country experiences with private health insurance, care for children and the elderly, and private pension provision, three main conclusions can be drawn. First, opening provision to a diversity of providers has often promoted more choice and innovation. Second, however, efficiency gains have often been limited. This is due to a number of inter-related reasons: (a) Individualisation of packages of services is expensive. (b) In order to ensure adequate coverage of the population, cross-subsidisation of particular groups of people is often mandated on providers, reducing cost-competition and diversity of choice. (c) Informational asymmetries (how good is this childcare which I cannot personally monitor, or this health care package which I am not technically able to assess?) cannot be overcome without extensive regulation, which has the effect of limiting innovation and competition. (d) The fiscal incentives necessary to stimulate private provision are high, and have welfare costs of their own. Third, and related to this last point, the distributional effects of private provision raise significant social problems. Private financing and provision of social benefits is not a magic wand; waving it in the social protection field will not mean that the economy and voters will be freed from some great deadweight that has been dragging them down. Nevertheless, the private sector can sometimes deliver either a slightly cheaper, slightly more varied or slightly more flexible system of social protection.
|Date of creation:||Mar 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
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.:
- Andrea Bassanini & Stefano Scarpetta, 2001.
"The Driving Forces of Economic Growth: Panel Data Evidence for the OECD Countries,"
OECD Economic Studies,
OECD Publishing, vol. 2001(2), pages 9-56.
- Andrea Bassanini & Stefano Scarpetta, 2001. "The Driving Forces of Economic Growth: Panel Data Evidence for the OECD Countries," Post-Print halshs-00168383, HAL.
- Thai-Thanh Dang & Pablo Antolín & Howard Oxley, 2001. "Fiscal Implications of Ageing: Projections of Age-Related Spending," OECD Economics Department Working Papers 305, OECD Publishing.
- Pablo Antolín & Alain de Serres & Christine de la Maisonneuve, 2004. "Long-Term Budgetary Implications of Tax-Favoured Retirement Plans," OECD Economics Department Working Papers 393, OECD Publishing.
- Willem Adema, 2001. "Net Social Expenditure: 2nd Edition," OECD Labour Market and Social Policy Occasional Papers 52, OECD Publishing.
- Jens Lundsgaard, 2002. "Competition and Efficiency in Publicly Funded Services," OECD Economic Studies, OECD Publishing, vol. 2002(2), pages 79-128.
- Jens Lundsgaard, 2002. "Competition and Efficiency in Publicly Funded Services," OECD Economics Department Working Papers 331, OECD Publishing.
- A. B. Atkinson, 1999. "The Economic Consequences of Rolling Back the Welfare State," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011719, June.
- Roman Arjona & Maxime Ladaique & Mark Pearson, 2001. "Growth, Inequality and Social Protection," OECD Labour Market and Social Policy Occasional Papers 51, OECD Publishing.
- Greß, Stefan & Okma, Kieke G. H. & Wasem, Jürgen, 2002. "Private health insurance in social health insurance countries: Market outcomes and policy implications," Wirtschaftswissenschaftliche Diskussionspapiere 01/2002, Ernst Moritz Arndt University of Greifswald, Faculty of Law and Economics.
- Willem Adema & Marcel Einerhand, 1998. "The Growing Role of Private Social Benefits," OECD Labour Market and Social Policy Occasional Papers 32, OECD Publishing.
- David W. Kalisch & Tetsuya Aman & Libbie A. Buchele, 1998. "Social and Health Policies in OECD Countries: A Survey of Current Programmes and Recent Developments," OECD Labour Market and Social Policy Occasional Papers 33, OECD Publishing.
- Francesca Colombo, 2001. "Towards More Choice in Social Protection?: Individual Choice of Insurer in Basic Mandatory Health Insurance in Switzerland," OECD Labour Market and Social Policy Occasional Papers 53, OECD Publishing.
- Blank, Rebecca M, 2000.
"When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services,"
Royal Economic Society, vol. 110(462), pages C34-49, March.
- Rebecca M. Blank, 1999. "When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services," NBER Working Papers 7099, National Bureau of Economic Research, Inc.
- Michael Leahy & Sebastian Schich & Gert Wehinger & Florian Pelgrin & Thorsteinn Thorgeirsson, 2001. "Contributions of Financial Systems to Growth in OECD Countries," OECD Economics Department Working Papers 280, OECD Publishing.
- Jane Hall & Richard De Abreu Lourenco & Rosalie Viney, 1999. "Carrots and sticks-the fall and fall of private health insurance in Australia," Health Economics, John Wiley & Sons, Ltd., vol. 8(8), pages 653-660.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp1544. 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: (Mark Fallak)
If references are entirely missing, you can add them using this form.