Contracting Out Public Service Provision to Not-for-Profit Firms
Brunel University - Economics and Finance; Institute for the Study of Labor (IZA); University of Wales, Swansea - School of Business and Economics; Centre for Economic Policy Research (CEPR)
University of Rome Tor Vergata ; University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO)
April 30, 2007
In an incomplete contract setting, we analyze the contracting out of public service provision, comparing the performance of for-profit and not-for-profit firms (NPs). Two institutional arrangements are considered, with control rights lying either with the firm ("PPP") or the government ("traditional procurement"). The use of an NP with traditional procurement is found never to be the preferred option in terms of social welfare. But for a range of parameter values an NP in a PPP is the preferred option. The development of PPP provision has thus created opportunities for the advantageous use of NPs in public services.
Number of Pages in PDF File: 29
Keywords: contracting out, not-for-profit firms, private finance initiative, public-private partnership, incomplete contracts, public service provision
JEL Classification: H41, L31, L33.working papers series
Date posted: October 15, 2007
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