Social Impact Bonds in Nonprofit Health Care: New Product or New Package?

12 Pages Posted: 28 Apr 2013

See all articles by Mark V. Pauly

Mark V. Pauly

University of Pennsylvania - Health Care Systems Department; National Bureau of Economic Research (NBER)

Ashley Swanson

Columbia University - Columbia Business School; NBER

Date Written: April 2013

Abstract

This note considers a relatively new form of financing for social services, the "Social Impact Bond." Proponents of Social Impact Bonds argue that they present a solution to several problems in funding social services, including performance measurement and the distribution of risk. Using a simple model, we demonstrate that Social Impact Bonds have many features present in standard financing arrangements. They will lead to greater program success when investors' effort can positively influence outcomes, but are unlikely to do so otherwise. We conclude that the value of this funding innovation will be strongly context-dependent.

Suggested Citation

Pauly, Mark V. and Swanson, Ashley, Social Impact Bonds in Nonprofit Health Care: New Product or New Package? (April 2013). NBER Working Paper No. w18991. Available at SSRN: https://ssrn.com/abstract=2257181

Mark V. Pauly (Contact Author)

University of Pennsylvania - Health Care Systems Department ( email )

3641 Locust Walk
208 Colonial Penn Center
Philadelphia, PA 19104-6358
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ashley Swanson

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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