Working Paper: CEPR ID: DP9939
Authors: Mats Bergman; Per Johansson; Sofia Lundberg; Giancarlo Spagnolo
Abstract: Non-contractible quality dimensions are at risk of degradation when the provision of public services is privatized. However, privatization may increase quality by fostering performance-improving innovation, particularly if combined with increased competition. We assemble a large data set on elderly care services in Sweden between 1990 and 2009 and estimate how opening to private provision affected mortality rates ? an important and not easily contractible quality dimension ? using a difference-in-difference-in-difference approach. The results indicate that privatization and the associated increase in competition significantly improved non-contractible quality as measured by mortality rates. It also reduced the cost per resident, although left total cost unaffected.
Keywords: competition; incomplete contracts; limited enforcement; mortality; nursing homes; outsourcing; performance measurement; privatization; procurement; public services; quality
JEL Codes: H57; I18; L33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Privatization (L33) | Mortality Rates (I12) |
| Privatization (L33) | Noncontractible Quality (L15) |
| Privatization (L33) | Per-Resident Cost of Service (H49) |
| Mortality Rates (I12) | Expected Remaining Life (C41) |
| Privatization (L33) | Number of Beds (Y10) |