When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services

29 Pages Posted: 16 Jul 1999 Last revised: 5 May 2000

Date Written: April 1999

Abstract

The privatization of social services is being increasingly discussed. The social services market is characterized by multiple market failures, including informational asymmetries, agency problems, externalities, and distributional concerns. Consumers may care as much or more about quality of services than about price. If quality is readily observable, the government can regulate private providers to assure standards are met. But when standards are difficult to observe or when the recipient is not the agent who makes the decisions, government ownership may be preferable. This paper categorizes the market situations in which the government provision of social services is likely to be most versus least attractive.

Suggested Citation

Blank, Rebecca M., When Can Public Policy Makers Rely on Private Markets? The Effective Provision of Social Services (April 1999). NBER Working Paper No. w7099, Available at SSRN: https://ssrn.com/abstract=164969

Rebecca M. Blank (Contact Author)

U.S. Department of Commerce ( email )

1401 Constitution Ave, N.W.
Rm 5838, HCHB
Washington, DC 20230
United States
202-482-3727 (Phone)

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