Working Paper No. 874

Outsourcing Public Services: Ownership, Competition, Quality and Contracting

Published: June 16, 2011Pages: 36Keywords: Outsourcing; Contracts; Tendering; Ownership; Competition; Quality JEL-codes: D23; H11; L33

Outsourcing Public Services: Ownership, Competition, Quality and Contracting Fredrik Andersson and Henrik Jordahl


We survey the literature on the effects of public sector outsourcing. Guided by theory, we systematically arrange services according to the type and magnitude of their contractibility problems. Taken as a whole, the empirical literature indicates that public sector outsourcing generally reduces costs without hurting quality. This is clearly the case for “perfectly contractible services” like garbage collection, but outsourcing often seems to work reasonably well also for some services with more difficult contracting problems, e.g. fire protection and prisons. Outsourcing seems to be more problematic for credence goods, with residential youth care as the prime example. In contrast to previous reviews, we conclude that ownership and competition appear to be about equally important for the consequences of public sector outsourcing.

Henrik Jordahl

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henrik.jordahl@ifn.se

Fredrik Andersson

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Fredrik.Andersson@nek...

Interdisciplinary European Studies

Trust in the European Union in Challenging Times

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This is the first book in the Interdisciplinary European Studies collection. This volume provides an interdisciplinary perspective on trust in the EU from the vantage point of political science, law and economics. Lars Oxelheim, Lund University and affiliated to IFN, is one of the authors.

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