Profit, Choice, and Competition

Abstract

Abstract This chapter draws on recent empirical work and summarizes the quantitative research on the effects of privatization, for-profit firms, choice, and competition in the Swedish welfare sector. By treating the effect studies together, the chapter presents a coherent picture of the lessons learned across the major welfare areas of education, health care, and elderly care. Overall, private providers appear on average to be a bit better in terms of quality and are also more productive. Choice and competition have improved several services, most notably compulsory education and elderly care. The evidence is more mixed for education at the upper-secondary level, where students at independent schools are more likely to finish on time and continue to tertiary education, but also perform worse on externally graded tests and benefit from lenient grading. A key takeaway is that the design of regulation and quality control matters greatly for outcomes. Each welfare service brings its lessons and mechanisms for quality control of both private and public providers should be strengthened. A general observation is that the playing field is often tilted against private providers since local governments are both arbiters of quality for private providers and a competing service provider. Widespread loss-making among municipal providers suggests that municipalities often treat their own in-house providers more leniently than private providers. In education, attempts at cream-skimming have been more evident at independent schools than at municipal schools. In other services, there is no systematic evidence that private providers practice cream-skimming to the detriment of weak groups, which is also illegal.