Do Government Agencies Respond to Market Pressures? Evidence from Private Prisons

41 Pages Posted: 22 Oct 2003 Last revised: 20 Nov 2015

James F. Blumstein

Vanderbilt University - Law School; Vanderbilt University - Owen Graduate School of Management

Mark A. Cohen

Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Law School; Resources for the Future

Suman Seth

University of Leeds - Economics Division; Oxford Poverty & Human Development Initiative

Date Written: December 2007

Abstract

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.

Keywords: privatization, prisons, growth in government

JEL Classification: H4, K4, L33

Suggested Citation

Blumstein, James F. and Cohen, Mark A. and Seth, Suman, Do Government Agencies Respond to Market Pressures? Evidence from Private Prisons (December 2007). Vanderbilt Law and Economics Research Paper No. 03-16; Vanderbilt Public Law Research Paper No. 03-05. Available at SSRN: https://ssrn.com/abstract=441007 or http://dx.doi.org/10.2139/ssrn.441007

James F. Blumstein

Vanderbilt University - Law School ( email )

131 21st Avenue South
Health Policy Center
Nashville, TN 37203-1181
United States
(615) 343-3939 (Phone)
(615) 322-6631 (Fax)

HOME PAGE: http://law.vanderbilt.edu/bio/james-blumstein

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
Nashville, TN 37203
United States

Mark A. Cohen (Contact Author)

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
Nashville, TN 37203
United States
615-322-0533 (Phone)

HOME PAGE: http://www.mba.vanderbilt.edu/faculty/mcohen.cfm

Vanderbilt University - Law School

131 21st Avenue South
Nashville, TN 37203-1181
United States

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States
202-328-5000 (Phone)

Suman Seth

University of Leeds - Economics Division ( email )

Leeds LS2 9JT
United Kingdom
+44(0)1133432629 (Phone)

HOME PAGE: http://business.leeds.ac.uk/about-us/our-people/staff-directory/profile/suman-seth/

Oxford Poverty & Human Development Initiative ( email )

3 Mansfield Road
Queen Elizabeth House
Oxford, Oxfordshire OX1 3TB
United Kingdom
+44 1865 618643 (Phone)

HOME PAGE: http://www.ophi.org.uk/about/people/current-people/suman-seth/

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