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Title: Contracting out public service provision to not-for-profit firms
Authors: Bennett, J
Iossa, E
Keywords: Contracting out;Not-for-profit firms;Private finance initiative;Public-private partnership;Incomplete contracts;Public service provision
Issue Date: 2010
Publisher: Oxford University Press
Citation: Oxford Economic Papers, 62(4), 784 - 802, 2010
Abstract: In an incomplete-contract setting, we analyse the contracting out of public service provision, comparing the performance of for-profit (FP) and not-for-profit (NP) firms. Two institutional arrangements are considered, control rights lying either with the firm (PPP) or the government (traditional procurement). We show that provision by an NP may be associated with overinvestment in quality improvement, but that under conditions that restrain this overinvestment, the NP may yield greater welfare than obtains with FP-provision. Although none of the four possible arrangements is preferable under all conditions, the introduction of PPP has enhanced the scope for advantageous provision by an NP.
Description: This is a pre-copyedited, author-produced PDF of an article accepted for publication in Oxford Economic Papers following peer review. The definitive publisher-authenticated version in Oxford Economic Papers volume 62, issue 4 is available online at the link below.
ISSN: 1464-3812
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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