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Outsourcing And Public Sector Efficiency: How Effective Is Outsourcing In Dealing With Impure Public Goods?

  • Argentino Pessoa

    ()

    (Faculdade de Economia da Universidade do Porto, Portugal)

The debate on new public management, together with the shortage of public funds, has had a considerable impact on public administration. Accordingly, many governments have searched positive impacts on the efficiency, equity and quality provision of public services through increasing competition and active participation of the private sector, considering outsourcing as the appropriate instrument to attain such endeavor. However, private involvement in public services provision is controversial. While, on the one hand it is touted as a way to increase efficiency and accountability by turning over choices to individuals in the market place, on the other hand, some argue that it has the potential to produce considerable fraud and corruption if managerial control by the public sector is weak. So, given this context, we aim to assess the private involvement in public services in efficiency terms, putting aside ideological considerations. So, after the introduction, we present a definition of public goods and we characterize their different types, with particular emphasis on “impure” public goods. Section 3, focuses on market failures together with equity considerations as the main reasons that configure the role of the public sector in providing impure public goods, as well as on the possibility of government failures. Section 4 deals with the benefits and costs of outsourcing in the public sector. Section 5 describes the most frequent forms of private sector involvement in the provision of impure public goods, as well as the advantages and disadvantages of the different options. Section 6 carries out some comments on the need for regulation. Finally, section 7 concludes.

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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 329.

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Length: 30 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:por:fepwps:329
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  1. Jean-Etienne de Bettignies & Thomas W. Ross, 2004. "The Economics of Public-Private Partnerships," Canadian Public Policy, University of Toronto Press, vol. 30(2), pages 135-154, June.
  2. Argentino Pessoa, 2008. "Public-Private Sector Partnerships In Developing Countries: Are Infrastructures Responding To The New Oda Strategy," FEP Working Papers 266, Universidade do Porto, Faculdade de Economia do Porto.
  3. S. Illeris & G. Akehurst, 2001. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 21(1), pages 1-4, January.
  4. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
  5. Roland N. McKean & Jacquelene M. Browning, 1975. "Externalities from Government and Non-Profit Sectors," Canadian Journal of Economics, Canadian Economics Association, vol. 8(4), pages 574-90, November.
  6. Blank, Rebecca M, 2000. "When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services," Economic Journal, Royal Economic Society, vol. 110(462), pages C34-49, March.
  7. Argentino Pessoa & Mário Rui Silva, 2009. "Environment Based Innovation: Policy Questions," FEP Working Papers 308, Universidade do Porto, Faculdade de Economia do Porto.
  8. Tibor Scitovsky, 1954. "Two Concepts of External Economies," Journal of Political Economy, University of Chicago Press, vol. 62, pages 143.
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