Contracting Out Public Service Provision to Not-for-Profit Firms

29 Pages Posted: 15 Oct 2007

See all articles by John Bennett

John Bennett

Brunel University London - 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)

Elisabetta Iossa

University of Rome Tor Vergata; IEFE Bocconi University; Centre for Economic Policy Research (CEPR)

Date Written: April 30, 2007

Abstract

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.

Keywords: contracting out, not-for-profit firms, private finance initiative, public-private partnership, incomplete contracts, public service provision

JEL Classification: H41, L31, L33.

Suggested Citation

Bennett, John and Iossa, Elisabetta, Contracting Out Public Service Provision to Not-for-Profit Firms (April 30, 2007). Available at SSRN: https://ssrn.com/abstract=1018206 or http://dx.doi.org/10.2139/ssrn.1018206

John Bennett (Contact Author)

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom
+44 1895 816 201 (Phone)
+44 1895 203 384 (Fax)

Institute for the Study of Labor (IZA)

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Germany

University of Wales, Swansea - School of Business and Economics ( email )

Singleton Park
Swansea, Wales SA2 8PP SA2 8PP
United Kingdom
+44 1792 295 168 (Phone)
+44 1792 295 872 (Fax)

Centre for Economic Policy Research (CEPR)

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United Kingdom

Elisabetta Iossa

University of Rome Tor Vergata ( email )

Via Columbia n.2
Rome, 00133
Italy

IEFE Bocconi University ( email )

Via Roentgen 1
Milan, Milan 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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