Arbeitspapier
Will privatization reduce costs?
I develop a model of public sector contracting based on the multitask framework by Holmström and Milgrom (1991). In this model, an agent can put effort into increasing the quality of a service or reducing costs. Being residual claimants, private owners have stronger incentives to cut costs than public employees. However, if quality cannot be perfectly measured, providing a private firm with incentives to improve quality forces the owner of the firm to bear risk. As a result, private firms will always be cheaper for low levels of quality but might be more expensive for high levels of quality. Extending the model to allow for differences in task attractiveness, I find that public firms shun unattractive tasks, whereas private firms undertake them if incentives are strong enough.
- Language
-
Englisch
- Bibliographic citation
-
Series: SSE/EFI Working Paper Series in Economics and Finance ; No. 660
- Classification
-
Wirtschaft
Structure, Scope, and Performance of Government
Publicly Provided Goods: General
Public Enterprises; Public-Private Enterprises
Comparison of Public and Private Enterprises and Nonprofit Institutions; Privatization; Contracting Out
- Subject
-
Privatization
public sector contracting
incomplete contracts
contracting out
Öffentliche Dienstleistung
Wirtschaftliche Effizienz
Privatisierung
Outsourcing
Kostenanalyse
Theorie
- Event
-
Geistige Schöpfung
- (who)
-
Lindqvist, Erik
- Event
-
Veröffentlichung
- (who)
-
Stockholm School of Economics, The Economic Research Institute (EFI)
- (where)
-
Stockholm
- (when)
-
2007
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Lindqvist, Erik
- Stockholm School of Economics, The Economic Research Institute (EFI)
Time of origin
- 2007
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