Privatization and quality: Evidence from elderly care in Sweden
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Original versionBergman, Mats A., Johansson, Per, Lundberg, Sofia, & Spagnolo, Giancarlo. (2016). Privatization and quality: Evidence from elderly care in Sweden. Journal of Health Economics, 49, 109-119. https://doi.org/10.1016/j.jhealeco.2016.06.010
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.