Privatization and quality: Evidence from elderly care in Sweden

Area of Science:

• Health Economics
• Public Policy
• Gerontology

Background:

• Privatization of public services can risk degrading non-contractible quality dimensions.
• Increased competition may drive innovation and improve service quality.

Purpose of the Study:

• To investigate the impact of privatization and competition on mortality rates in Swedish elderly care services.
• To assess whether privatization improves non-contractible quality in public service provision.

Main Methods:

• Utilized a difference-in-difference-in-difference (DDD) approach for robust causal inference.
• Assembled a large dataset on elderly care services in Sweden from 1990 to 2009.
• Focused on mortality rates as a key indicator of non-contractible quality.

Main Results:

• Privatization of elderly care services was associated with a significant decrease in mortality rates.
• Increased competition resulting from privatization further enhanced this positive effect on quality.
• The study found improvements in a critical, non-contractible quality dimension.

Conclusions:

• Privatization, especially when coupled with increased competition, can effectively improve non-contractible quality in public services.
• Elderly care services provide a relevant case study for the positive impacts of market-oriented reforms.
• Policy interventions should consider the role of competition in mitigating risks associated with public service privatization.