Date Added: Jun 2011
The authors survey the literature on the effects of public sector outsourcing. Guided by theory, they systematically arrange services according to the type and magnitude of their contractibility problems. Taken as a whole, the empirical literature indicates that public sector outsourcing generally reduces costs without hurting quality. This is clearly the case for "Perfectly contractible services" like garbage collection, but outsourcing often seems to work reasonably well also for some services with more difficult contracting problems, e.g. fire protection and prisons.