Does Privatising Public Service Provision Reduce Accountability?

Ellman, Matthew

doi:10.2139/ssrn.1002830

Cited by 9 publications

(9 citation statements)

References 16 publications

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“…While Ellman (2006) finds that it is always optimal to have in-house provision relative to contracting out provision regarding the political and public accountability, I show that under some conditions, the contracting-out model in which the private provider bears the demand risk might dominate the public provision since it allows political accountability as well as cost-reducing investments.…”

Section: Comparison With the Public Provisionmentioning

confidence: 84%

“…Ellman (2006) is the unique author to our knowledge that theoretically raises the question of the accountability of public authorities in private provision of public services. More precisely, in this paper, the author compares private with public provision regarding political and public accountability.…”

Section: Related Literaturementioning

confidence: 99%

“…a contract in which the private provider does not bear the demand risk. According to Ellman (2006), "In the aftermath of a series of television reports on school diners by celebrity chef Jamie Oliver in early 2005, the government rushed to quench mounting public discontent over low quality committing to make improvements. However, new schools locked into 25-year contracts through private finance initiatives (PFIs) are finding that they cannot rid their menus of junk food despite the government's pledge".…”

Section: Figurementioning

confidence: 99%

“…This section presents a simple model of the choice by procuring authorities between availability and concession contracts for the provision of a public service by a private provider (such as health care, transportation, water, education or school dinner catering), derived along the lines of Ellman (2006). I consider first the model in which the private public-service provider does not make any effort to adapt the service.…”

Section: The Modelmentioning

confidence: 99%

“…In other words, we assume that private providers' remuneration is bounded and can only be reduced by the changing demand. 8 I neglect the effort investments of consumers to discover improved policies and technologies because Ellman (2006) already models the public's role in creating accountability and proves that private providers indirectly I denote the corresponding adapted contract by Z , again with the non-contingent transfer set to just compensate the standard cost of provision. For simplicity, I assume that e helps PM to satisfy Z so that PM 's net payoff from enforcement of contract Z is again ) (e w .…”

Section: Adaptation and Political Accountabilitymentioning

confidence: 99%

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Political Accountability, Incentives, and Contractual Design of Public Private Partnerships

Athias

2009

SSRN Journal

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Service adaptations, when there is changing demand or problems regarding the service provision, constitute a major issue in Public Private Partnerships (PPPs). So far, studies have explained the ex post adaptation problems by the distorted incentives for the private public-service provider to invest in adaptation efforts. However, as any PPP is between a public authority and a private public-service provider (no market price), public authorities have also an important role to play in the adaptation of the private public-service provision over time. This paper studies how the contractual design of PPPs affects accountability and incentives for contractually unanticipated service adaptations. More specifically, we observe worldwide two main different contracting out procedures: the concession contract and the availability contract. The main difference between these two contractual practices concerns the demand risk, which is borne by private providers in the first case and by public authorities in the second case. This paper shows that there are two main effects of the contractual design on accountability. (1) Concession contracts, compared to availability contracts, motivate more public authorities from investigating and responding to public demands. This is due to the fact that under a concession contract consumers are empowered, i.e. have the possibility to oust the private provider, which provides public authorities with more credibility in side-trading. (2) Concession contracts can give greater adaptation effort incentives to private providers than availability contracts, since, if private providers bear the demand risk, they can receive private gains from implementing the adaptation. The striking policy implication of this paper is then that the trend towards a greater resort to contracts where private providers bear little or no demand risk may not be optimal in terms of allocative efficiency.JEL codes: D23, H1, L5, 017.

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Section: Comparison With the Public Provisionmentioning

confidence: 84%

Section: Related Literaturementioning

confidence: 99%

Section: Figurementioning

confidence: 99%

Section: The Modelmentioning

confidence: 99%

Section: Adaptation and Political Accountabilitymentioning

confidence: 99%

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