Sofia Lundberg

Per-Olov Johansson

Centre for Economic Policy Research (Great Britain)

Giancarlo Spagnolo

Mats Bergman

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. It also reduced the cost per resident, although left total cost unaffected.

Mats Bergman

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