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| Author: | Bennedsen, M. Schultz, C. |
| Title: | Arm's length delegation of public services |
| Journal: | Journal of Public Economics
2011 : AUG, VOL 95:7-8 p. 543-552 |
| Index terms: | outsourcing incentives public services decision making politics public corporations |
| Language: | eng |
| Abstract: | Delegation is a crucial feature of political decision making: Mayors and prime ministers delegate to subordinates, whereas voters delegate to elected representatives. We inspect the effect of political delegation on public service provision and the choice between private and public providers when contracts are incomplete and incentives therefore distorted. Two important effects are identified: The incentive effect increases the incentive part of service providers' remuneration and delegation may thus be a substitute for an explicit complete incentive contract. The bargaining effect improves the bargaining position vis a vis a private company with market power. In general, these effects suggest that delegation improves public service provision. |
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