The Proper Scope of Government: Theory and an Application to Prisons

@article{Hart1996ThePS,
  title={The Proper Scope of Government: Theory and an Application to Prisons},
  author={O. Hart and A. Shleifer and R. Vishny},
  journal={Microeconomic Theory eJournal},
  year={1996}
}
When should a government provide a service inhouse and when should it contract out provision? We develop a model in which the provider can invest in improving the quality of service or reducing cost. If contracts are incomplete, the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee. However, the private contractor's incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on… Expand
The Modes of Provision of Prison Services in a Comparative Perspective
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