How privatization affects public service quality: an empirical analysis of prisons in England and Wales, 1998-2012.

Abstract

The impact of privatization on public service quality is an enduring issue in public policy and management. Advocates of privatization suggest that market forces prompt private firms to provide better quality services, while opponents point towards the potential for quality to be traded off against profits. Drawing on incomplete contract and capability theories, we explore a more nuanced possibility: that private providers of public services perform better on dimensions of public service quality that are easier to measure and monitor, and vice versa. Using panel data on service quality in prisons in England and Wales in the period 1998 to 2012, we find that privately managed prisons do perform better on dimensions of quality, such as confinement conditions and prisoner activity, which are more easily measured, whereas public prisons perform better on dimensions of quality, such as levels of order and prisoner safety, which are less easily measured and managed.