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IR14-018_Bel-Rosell.pdf (735.05 KB)

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Working paper

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2014

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cc-by-nc-nd, (c) Bel i Queralt et al., 2014
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/57586

Public and Private Production in a Mixed Delivery System: Regulation, Competition and Costs [WP]

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Abstract

Academics and policy makers are increasingly shifting the debate concerning the best form of public service provision beyond the traditional dilemma between pure public and pure private delivery modes, because, among other reasons, there is a growing body of evidence that casts doubt on the existence of systematic cost savings from privatization, while any competition seems to be eroded over time. In this paper we compare the relative merits of public and private delivery within a mixed delivery system. We study the role played by ownership, transaction costs, and competition on local public service delivery within the same jurisdiction. Using a stochastic cost frontier, we analyze the public-private urban bus system in the Barcelona Metropolitan Area. Our results suggest that private firms tendering the service have higher delivery costs than those incurred by the public firm, especially when transaction costs are taken into account. Tenders, therefore, do not help to reduce delivery costs. Our results suggest that under a mixed delivery scheme, which permits the co-existence of public and private production, the metropolitan government and the regulator can use private delivery to contain costs in the public firm and, at the same time, benefit from the greater flexibility of private firms for dealing with events not provided for under contract.

Subject

Serveis públics, Investigació amb mètodes mixtos, Control de gestió, Administració local

Subject (English)

Public utilities, Mixed methods research, Management audit, Local government

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Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))

Citation

BEL I QUERALT, Germà and ROSELL I SEGURA, Jordi. Public and Private Production in a Mixed Delivery System: Regulation, Competition and Costs [WP]. IREA – Working Papers. 2014. Vol.  IR14/18. ISSN 2014-1254. [consulted: 9 of August of 2026]. Available at: https://hdl.handle.net/2445/57586

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