Outsourcing And Public Sector Efficiency: How Effective Is Outsourcing In Dealing With Impure Public Goods?

Argentino Pessoa

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: The debate on new public management, together with the shortage of public funds, has had a considerable impact on public administration. Accordingly, many governments have searched positive impacts on the efficiency, equity and quality provision of public services through increasing competition and active participation of the private sector, considering outsourcing as the appropriate instrument to attain such endeavor. However, private involvement in public services provision is controversial. While, on the one hand it is touted as a way to increase efficiency and accountability by turning over choices to individuals in the market place, on the other hand, some argue that it has the potential to produce considerable fraud and corruption if managerial control by the public sector is weak. So, given this context, we aim to assess the private involvement in public services in efficiency terms, putting aside ideological considerations. So, after the introduction, we present a definition of public goods and we characterize their different types, with particular emphasis on “impure” public goods. Section 3, focuses on market failures together with equity considerations as the main reasons that configure the role of the public sector in providing impure public goods, as well as on the possibility of government failures. Section 4 deals with the benefits and costs of outsourcing in the public sector. Section 5 describes the most frequent forms of private sector involvement in the provision of impure public goods, as well as the advantages and disadvantages of the different options. Section 6 carries out some comments on the need for regulation. Finally, section 7 concludes.

Keywords: Contracting out; impure public goods; market/government failures; private sector involvement; public sector (search for similar items in EconPapers)
JEL-codes: H42 H50 I18 I28 L33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2009-07
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:329

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