The effectiveness of the municipal firms in providing the services

The paper is dealing with the problem of so called "municipal" firms. I define them as the firms, which are based on commercial law but are owned by municipalities. The municipal firms are often used for providing services in the Czech Republic. However, this type of firm is connected with a lot of problems (transparency, effectiveness). The paper is divided into five main parts. I discuss the theoretical problems, which are connected with the municipal firm in the first part. I especially focus on the question, what is the main factor of increasing the effectiveness - if the change in the ownership or the competition pressure. The second part describes the current situation in the Czech Republic and here I try to estimate, which part of public procurement market on the municipal level is controlled through the municipal firms. In the third part I have developed the model, which shows that for the municipalities can be reasonable to contract the municipal firm despite it is more expensive that classical outsourcing. Next part is dealing with the economical effectiveness of the municipal firms. The result of empirical research shows, that this type of the firm is the most expensive solution in the providing services on the municipal level. The last part, conclusion, summarise the main results and formulate the policy recommendations, which could increase the effectiveness of the public sector as well as of the economy as a whole.