Market Mechanisms in Public Service Provision

This paper presents a new set of institutional indicators that assess how sub-central governments harness market mechanisms such as tendering, outsourcing, user choice and competition, user fees and output-related funding when providing public services. Services put under scrutiny comprise primary, secondary and tertiary education, hospital care, childcare and elderly care, public transport, and waste collection. Results indicate that governments are often reluctant to apply market mechanisms when providing public services. “Technical” services such as transport or waste collection are more open to market mechanisms than “social” services like education or health care. Regulatory innovations such as tendering, competition or user choice are more advanced than financial innovations like user fees or output-related funding for service providers.