Do Government Agencies Respond to Market Pressures? Evidence from Private Prisons
James F. Blumstein
Vanderbilt University - Law School
Mark A. Cohen
Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Law School; Resources for the Future
Oxford Poverty & Human Development Initiative
Vanderbilt Law and Economics Research Paper No. 03-16
Vanderbilt Public Law Research Paper No. 03-05
This paper examines the role of privatization on the cost of government-provided services. We examine data on the cost of housing public and private prisoners from all 50 states over the time period 1996-2004, and find that the existence of private prisons in a state reduces the growth in per prisoner expenditures by public prisons by a statistically significant amount. In 2004, the average Department of Corrections expenditures in states without private prisoners was approximately $493 million. Our findings suggest that if the "average" state in that group were to introduce the use of private prisons, the potential savings for one year in Department of Corrections expenditures for public prisons could be approximately $13 to $15 million for that particular hypothetical state. These savings on public prisons would be in addition to any direct savings from the use of private prisons by itself.
Number of Pages in PDF File: 41
Keywords: privatization, prisons, growth in government
JEL Classification: H4, K4, L33
Date posted: October 22, 2003 ; Last revised: November 19, 2012
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