Privatization and Quality: Evidence from Elderly Care in Sweden

Giancarlo Spagnolo With M. Bergman. P. Johansson and S. Lundberg, forthc. in the Journal of Health Economics, Volume 49, September 2016, Pages 109–119.

Abstract: Non-contractible quality dimensions are at risk of degradation when the provision of public services is privatized. However, privatization may increase quality by fostering performance-improving innovation, particularly if combined with increased competition. We assemble a large data set on elderly care services in Sweden between 1990 and 2009 and estimate how opening to private provision affected mortality rates – an important and not easily contractible quality dimension – using a difference-in-difference-in-difference approach. The results indicate that privatization and the associated increase in competition significantly improved non-contractible quality as measured by mortality rates.

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