Working Papers, Department of Economics, Lund University
Outsourcing Public Services: Ownership, Competition, Quality and Contracting
() and Henrik Jordahl
Abstract: 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.
Keywords: outsourcing; contracts; tendering; ownership; competition; quality; (follow links to similar papers)
JEL-Codes: D23; H11; L33; (follow links to similar papers)
36 pages, June 15, 2011
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