Abstract

http://ssrn.com/abstract=3629
 
 

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The Proper Scope of Government: Theory and an Application to Prisons


Oliver Hart


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Andrei Shleifer


Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Robert W. Vishny


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

September 1996

NBER Working Paper No. w5744

Abstract:     
When should a government provide a service inhouse and when should it contract out provision? We develop a model in which the provider can invest in improving the quality of service or reducing cost. If contracts are incomplete, the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee. However, the private contractor's incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on non-contractible quality. The model is applied to understanding the costs and benefits of prison privatization.

Number of Pages in PDF File: 58

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Date posted: January 8, 1997  

Suggested Citation

Hart , Oliver and Shleifer, Andrei and Vishny, Robert W., The Proper Scope of Government: Theory and an Application to Prisons (September 1996). NBER Working Paper No. w5744. Available at SSRN: http://ssrn.com/abstract=3629

Contact Information

Oliver D. Hart (Contact Author)
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-496-3461 (Phone)
617-495-7730 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Andrei Shleifer
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-495-5046 (Phone)
617-496-1708 (Fax)
HOME PAGE: http://www.economics.harvard.edu/~ashleife/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Robert W. Vishny
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
312-702-2522 (Phone)
312-702-0118 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  43
Citations:  177
Footnotes:  18

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