Discussion paper

DP9939 Privatization and Quality: Evidence from Elderly Care in Sweden

Non-contractible quality dimensions are at risk of degradation when the provision of public services is privatized. However, privatization may increase quality by fostering performance-improving innovation, particularly if combined with increased competition. We assemble a large data set on elderly care services in Sweden between 1990 and 2009 and estimate how opening to private provision affected mortality rates ? an important and not easily contractible quality dimension ? using a difference-in-difference-in-difference approach. The results indicate that privatization and the associated increase in competition significantly improved non-contractible quality as measured by mortality rates. It also reduced the cost per resident, although left total cost unaffected.


Spagnolo, G (2014), ‘DP9939 Privatization and Quality: Evidence from Elderly Care in Sweden‘, CEPR Discussion Paper No. 9939. CEPR Press, Paris & London. https://cepr.org/publications/dp9939