Public Services Under Private Management

Clicks: 14
ID: 313716
2026
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Abstract
Abstract Theory predicts that outsourcing public services to the private sector can reduce costs and improve efficiency, but can also induce cost-cutting and compromise quality. We assess the Brazilian “Organizações Sociais de Saude” model (OSS), which outsources management of public hospital services to the private sector while the state remains the residual claimant. We show that this enhances hospital production and operational efficiency without adverse effects on hospital quality and equity. Increased inpatient production addresses previously unmet demand, expanding local access to hospital care and reducing population mortality. Performance gains arise from improved operational efficiency achieved through increased hospital management capacity. This facilitates staffing adjustments, favoring higher-skilled personnel, dismissing lower-productivity staff, and adopting flexible, performance-tied employment contracts. Effects are larger among private organizations with more management experience, underscoring returns to managerial capacity. Our findings show that incentive-ownership structures can address the quantity-quality trade-off in public service delivery, even when contracts are incomplete and quality is hard to measure.
Reference Key
openalex_W7160945895 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Maíra Coube, Luiz Felipe Fontes, Rudi Rocha
Journal the quarterly journal of economics
Year 2026
DOI
10.1093/qje/qjag028
URL
https://doi.org/10.1093/qje/qjag028
Keywords Keywords not found

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