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Does privatising public service provision reduce accountability?

  • Matthew Ellman

This paper studies how privatising service provision (shifting control rights and contractual obligations to providers) affects accountability. There are two main effects. (1) Privatisation demotivates governments from investigating and responding to public demands, since providers then hold up service adaptations. (2) Privatisation demotivates the public from mobilising to pressure for service adaptations, since providers then indirectly holdup the public by inflating the government’s cost of implementing these adaptations. So, when choosing governance mode, politicians may be biased towards privatising as a way to escape public attention; relatedly, privatising utilities may reduce public pressure and increase consumer prices.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/997.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 997.

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Date of creation: Oct 2006
Date of revision:
Handle: RePEc:upf:upfgen:997
Contact details of provider: Web page: http://www.econ.upf.edu/

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  1. Stephen Coate & Timothy Besley, 2000. "Elected versus Appointed Regulators: Theory and Evidence," NBER Working Papers 7579, National Bureau of Economic Research, Inc.
  2. Besley, Timothy J. & Burgess, Robin, 2001. "The Political Economy of Government Responsiveness: Theory and Evidence from India," CEPR Discussion Papers 2721, C.E.P.R. Discussion Papers.
  3. Bennedsen, Morten, 2000. "Political ownership," Journal of Public Economics, Elsevier, vol. 76(3), pages 559-581, June.
  4. Hart, Oliver & Shleifer, Andrei & Vishny, Robert W, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1127-61, November.
  5. Jean-Jacques Laffont & Jean Tirole, 1991. "Privatization and Incentives," Working papers 572, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Eric Maskin, 2003. "The Politician and the Judge: Accountability in Government," Theory workshop papers 505798000000000076, UCLA Department of Economics.
  7. Klaus M. Schmidt, 1990. "The Costs and Benefits of Privatization," Discussion Paper Serie A 287, University of Bonn, Germany.
  8. John Kwoka, 2005. "The comparative advantage of public ownership: evidence from U.S. electric utilities," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 622-640, May.
  9. Anke S. Kessler & Christoph Lülfesmann, 2001. "Monitoring and Productive Efficiency in Public and Private Firms," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(2), pages 167-, February.
  10. John E. Kwoka, Jr., 2002. "Governance Alternatives and Pricing in the U.S. Electric Power Industry," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 278-294, April.
  11. Matthew Ellman, 2006. "The optimal length of contracts with application to outsourcing," Economics Working Papers 965, Department of Economics and Business, Universitat Pompeu Fabra.
  12. Besley, Timothy & Burgess, Robin, 2001. "Political agency, government responsiveness and the role of the media," European Economic Review, Elsevier, vol. 45(4-6), pages 629-640, May.
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