This study focuses on the production welfare services which are purchased by the government. We consider whether the delivery of the service should be public or private. The social impact of the service is determined by the satisfaction of unforeseen individual needs. Assuming that the information about these needs is ex post observed only by the producer of the service favours public production. Auctioning the right-to-produce contract, however, selects the most cost-efficient private supplier. Whether private production is optimal resolves from the trade-off between cost efficiency and a failure in meeting individual needs. We also analyse investments in monitoring.
In Grossman and Helpman’s (1994) canonical "Protection for Sale" (PFS) model political competition between industry lobbies is purely driven by their interests as consumers. This paper introduces demand linkages and oligopolistic competition into PFS framework to address the rivalry among lobbies due to product substitutability. It shows that increased substitutability weakens the interest groups’ incentives to lobby and reduces tariff distortions. This may explain why empirical tests of PFS find surprisingly little impact of lobbies on the government trade policy decision. The paper also analyzes endogenous lobby formation, suggesting that demand linkages may adversely affect industry decision to get organized.
by Elena Paltseva, forthcoming in Canadian Journal of Economics
Many quality dimensions are hard to contract upon and are at risk of degradation when services are procured rather than produced in-house. However, procurement may foster performance-improving innovation. We assemble a large data set on elderly care services in Sweden between 1990 and 2009, including survival rates - our measure of non-contractible quality - and subjectively perceived quality of service. We estimate how procurement from private providers affects these measures using a difference-in-difference approach. The results indicate that procurement significantly increases non-contractible quality as measured by survival rate, reduces the cost per resident but does not affect subjectively perceived quality.
Based on my recent work with several co-authors this paper explores the relationship between discretion, reputation, competition and entry in procurement markets. I focus especially on public procurement, which is highly regulated for accountability and trade reasons. In Europe regulation constrains the use of past performance information to select contractors while in the US its use is encouraged. I present some novel evidence on the benefits of allowing buyers to use reputational indicators based on past performance and discuss the complementary roles of discretion and restricted competition in reinforcing relational/reputational forces, both in theory and in a new
empirical study on the effects restricted rather than open auctions. I conclude reporting preliminary results form a laboratory experiment showing that reputational mechanisms can be designed to stimulate rather than hindering new entry.
In most jurisdictions, antitrust fines are based on affected commerce rather than on collusive profits, and in some others, caps on fines are introduced based on total firm sales rather than on affected commerce. We uncover a number of distortions that these policies generate, propose simple models to characterize their comparative static properties, and quantify them with simulations based on market data. We conclude by discussing the obvious need to depart from these distortive rules-of-thumb that appear to have the potential to substantially reduce social welfare.
The EU Leniency Programme (LP) aims to encourage the dissolution of existing cartels and the deterrence of future cartels, through spontaneous reporting and/or significant cooperation by cartel members during an investigation. However, the European Commission guidelines are rather vague in terms of the factors that influence the granting and scale of fine reductions. As expected, the results shown that the first reporting or cooperating firm receives generous fine reductions. More importantly, there is some evidence that firms can “learn how to play the leniency game”, either learning how to cheat or how to report, as the reductions given to multiple oenders (and their cartel partners) are substantially higher. These results have an ambiguous impact on firms’ incentives and major implications for policy making.
By Catarina Marvao, SITE Working Paper.
This paper estimates the impact of competition policy on total factor productivity growth for 22 industries in twelve OECD countries over 1995 to 2005. We find a positive and significant effect of competition policy as measured by created indexes. We provide results based on instrumental variables estimators and heterogeneous effects to support the causal nature of the established link. The effect is particularly strong for specific aspects of competition policy related to its institutional setup and antitrust activities. It is also strengthened by good legal systems, suggesting complementarities between competition policy and the efficiency of law enforcement institutions.
We investigate the impact of procurement thresholds on strategic behavior of public buyers in Sweden. We document signs of “bunching” at the threshold, which suggests that strategic behavior in procurement is potentially important in Sweden, and should not be overlooked in the on-going public debate on the procurement thresholds. At the same time, data limitations do not allow us to access the impact of this strategic behavior on procurement outcomes and efficiency. This calls for better and more extensive procurement data collection.
This paper reports results from an experiment studying how fines, leniency programs and reward schemes for whistleblowers affect cartel formation and prices. Antitrust without leniency reduces cartel formation, but increases cartel prices: subjects use costly fines as (altruistic) punishments. Leniency further increases deterrence, but stabilizes surviving cartels: subjects appear to anticipate harsher times after defections as leniency reduces recidivism and lowers post-conviction prices. With rewards, cartels are reported systematically and prices finally fall. If a ringleader is excluded from leniency, deterrence is unaffected but prices grow. Differences between treatments in Stockholm and Rome suggest culture may affect optimal law enforcement.
In Grossman and Helpman’s (1994) canonical "Protection for Sale" (PFS) model political competition between industry lobbies is purely driven by their interests as consumers. This paper introduces demand linkages and oligopolistic competition into PFS framework to address the rivalry among lobbies due to product substitutability. It shows that increased substitutability weakens the interest groups’ incentives to lobby and reduces tariff distortions. This may explain why empirical tests of PFS find surprisingly little impact of lobbies on the government trade policy decision. The paper also analyzes endogenous lobby formation, suggesting that demand linkages may adversely affect industry decision to get organized.
by Elena Paltseva, forthcoming in Canadian Journal of Economics
Many quality dimensions are hard to contract upon and are at risk of degradation when services are procured rather than produced in-house. However, procurement may foster performance-improving innovation. We assemble a large data set on elderly care services in Sweden between 1990 and 2009, including survival rates - our measure of non-contractible quality - and subjectively perceived quality of service. We estimate how procurement from private providers affects these measures using a difference-in-difference approach. The results indicate that procurement significantly increases non-contractible quality as measured by survival rate, reduces the cost per resident but does not affect subjectively perceived quality.
Based on my recent work with several co-authors this paper explores the relationship between discretion, reputation, competition and entry in procurement markets. I focus especially on public procurement, which is highly regulated for accountability and trade reasons. In Europe regulation constrains the use of past performance information to select contractors while in the US its use is encouraged. I present some novel evidence on the benefits of allowing buyers to use reputational indicators based on past performance and discuss the complementary roles of discretion and restricted competition in reinforcing relational/reputational forces, both in theory and in a new
empirical study on the effects restricted rather than open auctions. I conclude reporting preliminary results form a laboratory experiment showing that reputational mechanisms can be designed to stimulate rather than hindering new entry.
In most jurisdictions, antitrust fines are based on affected commerce rather than on collusive profits, and in some others, caps on fines are introduced based on total firm sales rather than on affected commerce. We uncover a number of distortions that these policies generate, propose simple models to characterize their comparative static properties, and quantify them with simulations based on market data. We conclude by discussing the obvious need to depart from these distortive rules-of-thumb that appear to have the potential to substantially reduce social welfare.
The EU Leniency Programme (LP) aims to encourage the dissolution of existing cartels and the deterrence of future cartels, through spontaneous reporting and/or significant cooperation by cartel members during an investigation. However, the European Commission guidelines are rather vague in terms of the factors that influence the granting and scale of fine reductions. As expected, the results shown that the first reporting or cooperating firm receives generous fine reductions. More importantly, there is some evidence that firms can “learn how to play the leniency game”, either learning how to cheat or how to report, as the reductions given to multiple oenders (and their cartel partners) are substantially higher. These results have an ambiguous impact on firms’ incentives and major implications for policy making.
By Catarina Marvao, SITE Working Paper.
This paper estimates the impact of competition policy on total factor productivity growth for 22 industries in twelve OECD countries over 1995 to 2005. We find a positive and significant effect of competition policy as measured by created indexes. We provide results based on instrumental variables estimators and heterogeneous effects to support the causal nature of the established link. The effect is particularly strong for specific aspects of competition policy related to its institutional setup and antitrust activities. It is also strengthened by good legal systems, suggesting complementarities between competition policy and the efficiency of law enforcement institutions.
We investigate the impact of procurement thresholds on strategic behavior of public buyers in Sweden. We document signs of “bunching” at the threshold, which suggests that strategic behavior in procurement is potentially important in Sweden, and should not be overlooked in the on-going public debate on the procurement thresholds. At the same time, data limitations do not allow us to access the impact of this strategic behavior on procurement outcomes and efficiency. This calls for better and more extensive procurement data collection.
This paper reports results from an experiment studying how fines, leniency programs and reward schemes for whistleblowers affect cartel formation and prices. Antitrust without leniency reduces cartel formation, but increases cartel prices: subjects use costly fines as (altruistic) punishments. Leniency further increases deterrence, but stabilizes surviving cartels: subjects appear to anticipate harsher times after defections as leniency reduces recidivism and lowers post-conviction prices. With rewards, cartels are reported systematically and prices finally fall. If a ringleader is excluded from leniency, deterrence is unaffected but prices grow. Differences between treatments in Stockholm and Rome suggest culture may affect optimal law enforcement.
Essays on economic analysis of competition law: theory and practice (Ph.D. di...Dr Danilo Samà
Essays on economic analysis of competition law: theory and practice
Author:
Dr Danilo Samà (LUISS “Guido Carli” University, Law & Economics LAB)
Abstract:
The Ph.D. dissertation, submitted to LUISS “Guido Carli” University of Rome in fulfillment of the requirements for the Degree of Doctor of Philosophy in Economic Analysis of Competition Law (XXV cicle), is the result of a scientific research in the field of the economic analysis of competition law developed through academic experiences at the Erasmus Rotterdam University in the Netherlands, the Ghent University in Belgium, the University of Hamburg in Germany and the Toulouse School of Economics in France, as well as through professional experiences as competition economist at the Antitrust Department of Pavia & Ansaldo and the Directorate-General for Competition (DG COMP) of the European Commission.
Keywords:
antitrust, competition economics, competition law, competition policy
JEL classification:
B21; C01; K21; L00; L4
Year:
2014
Pages:
1-40
Citation:
Samà, Danilo (2014), Essays on economic analysis of competition law: theory and practice, Law & Economics LAB, LUISS “Guido Carli” University, Rome, Italy, pp. 1-40.
Modern antitrust engenders a possible conflict between public and private enforcement due to the central role of Leniency Programs. Damage actions may reduce the attractiveness of Leniency Programs for cartel participants if their cooperation with the competition authority increases the chance that the cartel’s victims will bring a successful suit. A long legal debate culminated in a EU directive, adopted in November 2014, which seeks a balance between public and private enforcement. It protects the efectiveness of a Leniency Program by preventing the use of leniency statements in subsequent actions for damages and by limiting the liability of the immunity recipient to its direct and indirect purchasers. Our analysis shows such compromise is not required: limiting the cartel victims’ ability to recover their loss is not necessary to preserve the eectiveness of a Leniency Program and may be counterproductive. We show that damage actions will actually improve its eectiveness, through a legal regime in which the civil liability of the immunity recipient is minimized (as in Hungary) and full access to all evidence collected by the competition authority, including leniency statements, is granted to claimants (as in the US).
Check the latest research publications and presentations on our website http://www.hhs.se/site
We examine the effects of bank deregulation on the spatial dynamics of retail-bank branching, exploiting, much like a quasi-natural experiment, the context of intense liberalization
reforms in Belgium in the late nineties. Using fine-grained data on branch network dynamics within the metropolitan area of Antwerp and advancing novel spatial econometric techniques, we show that these liberalization reforms radically shifted and accelerated branch network dynamics. Entry and exit dynamics substantially intensified, the level change in financial void grew significantly, and bank choice markedly declined. Moreover, all these changes consistently extended (even with greater intensity) after the liberalization peak. However, the immediate and longer-term spatial ramifications of the financial sector liberalization were very distinct. All immediate changes systematically, differentially impacted the poorer and wealthier neighborhoods, disenfranchising the poorer neighbourhoods and favoring their wealthier counterparts. The longer-term e¤ects on spatial patterns of change no longer exhibited this systematic relationship with neighborhood income. We draw out the policy implications of our findings.
The effectiveness of competition policy: an econometric assessment in develop...Dr Danilo Samà
The effectiveness of competition policy: an econometric assessment in developed and developing countries
Author:
Dr Danilo Samà (LUISS “Guido Carli” University, Law & Economics LAB)
Abstract:
The ultimate objective of the present paper is to empirically investigate the effectiveness of competition policy in developed and developing countries. Although its importance is continuously increasing, the effectiveness of competition policy still seems to lack the attention that it would deserve. At the present state of art, the number of academic contributions that attempts to estimate its impact on relevant economic variables appears very limited, in particular for the less developed countries. However, an empirical literature aimed at measuring in objective terms the effect of competition policy on economic growth is emerging, starting from narrow variables of interest, such as Gross Domestic Product and Total Factor Productivity. As a result, the principal aim of the current work is to contribute to this branch of research, focusing on broader indicators of market performance, in order to understand whether the presence of an antitrust authority has a significant impact, thus an effective utility, on the level of competition of a country.
Keywords:
competition authorities, competition policy, developed countries, developing countries, economic development, economic growth, law & economics, market concentration, market efficiency, market performance, new institutional economics, political economy
JEL classification:
C21; C26; K21; L40
Year:
2013
Pages:
1-50
Citation:
Samà, Danilo (2013), The effectiveness of competition policy: an econometric assessment in developed and developing countries, Law & Economics LAB, LUISS “Guido Carli” University, Rome, Italy, pp. 1-50.
Since coming into office two years ago, Chinese President Xi Jinping has carried out a sweeping, highly publicized anticorruption campaign. Skeptics are debating whether the campaign is biased towards Mr. Xi’s rivals, and even possibly related to the current economic slowdown. What is less debated is the next stage of Mr. Xi’s anti-corruption strategy, which is going to alter the legal statutes. Amendment IX, proposed in October 2014, includes heavier penalties, but two important tools in the fight of corruption – one-sided leniency and asymmetric punishment – became more limited and discretional. We argue that studying a 1997 reform and its effects can shed some light onto why the Chinese leadership seems dissatisfied with the current legislation and the likely effects of the proposed changes.
Leniency policies and asymmetric punishment are regarded as potentially powerful anticorruption
tools, also in the light of their success in busting price-fixing cartels. It has been
argued, however, that the introduction of these policies in China in 1997 has not helped
fighting corruption. Following up on this view, the Central Committee of the Chinese Communist
Party passed, in November 2015, a reform introducing heavier penalties, but also
restrictions to leniency. Properly designing and correctly evaluating these policies is difficult.
Corruption is only observed if detected, and an increase in convictions is consistent
with both reduced deterrence or improved detection. We map the evolution of the Chinese
anti-corruption legislation, collect data on corruption cases for the period 1986-2010, and
apply a new method to identify deterrence effects from changes in detected cases developed
for cartels by Miller (2009). We document a large and stable fall in corruption cases
starting immediately after the 1997 reform, consistent with a negative effect of the reform
on corruption detection, but under specific assumptions also with increased deterrence. To
resolve this ambiguity, we collect and analyze a random sample of case files from corruption
trials. Results point to a negative effect of the 1997 reform, linked to the increased leniency
also for bribe-takers cooperating after being denounced. This likely enhanced their ability
to retaliate against reporting bribe-givers – chilling detection through whistleblowing – as
predicted by theories on how these programs should (not) be designed.
Leniency policies offering immunity to the first cartel member that blows the whistle and self-reports to the antitrust authority have become the main instrument in the fight against cartels around the world. In public procurement markets, however, bid-rigging schemes are often accompanied by corruption of public officials. In the absence of coordinated forms of leniency for unveiling corruption, a policy offering immunity from antitrust sanctions may not be sufficient to encourage wrongdoers to blow the whistle, as the leniency recipient will then be exposed to the risk of conviction for corruption. Explicitly introducing leniency policies for corruption, as has been recently done in Brazil and Mexico, is only a first step. To increase the effectiveness of leniency in multiple offense cases, we suggest, besides extending automatic leniency to individual criminal sanctions, the creation of a ‘one-stop-point’ enabling firms and individuals to report different crimes simultaneously and receive leniency for all of them at once if they are entitled to it.
We use a novel approach to address the question of whether a union of sovereign countries can efficiently raise and allocate a budget, even when members are purely self-interested and participation is voluntary. The main innovation of our model is to explore the link between budget contributions and allocation that arises when countries bargain over union outcomes. This link stems from the distribution of bargaining power being endogenously determined. Generically, it follows that unstructured bargaining gives an inefficient result. We find, however, that efficiency is achieved with fully homogenous countries, and when countries have similar incomes and the union budget is small. Moreover, some redistribution arises endogenously, even though nations are purely self-interested and not forced to participate in the union. A larger union budget, however, entails a trade-off between equality and efficiency. We also analyze alternative institutions and find that majority rule can improve efficiency if nations who prefer projects with high public good spillovers are endogenously selected to the majority coalition. Exogenous tax rules, such as the linear tax rule in the EU, which is designed to increase efficiency on the contribution margin, can also improve overall efficiency despite decreasing the efficiency of the allocation of funds.
Is competition policy useful for emerging countries? An empirical analysisDr Danilo Samà
Is competition policy useful for emerging countries? An empirical analysis
Authors:
Prof. Emeritus Roberto Pardolesi (LUISS “Guido Carli” University of Rome, Law & Economics LAB)
Dr Danilo Samà (CDC Cartel Damage Claims, Law & Economics LAB)
Abstract:
The ultimate objective of the paper is to empirically investigate the effectiveness of competition policy in emerging countries, focusing on broader indicators of market performance in order to understand whether the presence of an antitrust authority has a significant impact, hence an effective utility, on the level of competition of a developing country. From a policy perspective, the aim of the paper is also to assess whether the enforcement of a competition policy regime in a developing country has the same beneficial effects on the intensity of competition usually claimed to take place in the most developed countries. Relying upon a dataset and the connected econometric model developed by one of the authors, we provisionally conclude that in developing countries the institutional quality of the competition authorities matters more than the mere existence or the degree of competence for the effectiveness of a competition policy regime.
Keywords:
competition authorities, competition policy, developing countries, economic development, economic growth, law & economics, market concentration, market efficiency, market performance, new institutional economics, political economy
JEL classification:
C21; C26; K21; L40
Year:
2015
Pages:
25-38
Citation:
Pardolesi, Roberto, Samà, Danilo (2015), Is competition policy useful for emerging countries? An empirical analysis, in Bellantuomo, Giuseppe, de Rezende Lara, Fabiano Teodoro (eds.), Law, development and innovation, SxI - Springer for Innovation \ SxI - Springer per l’Innovazione, Vol. 13, Springer International Publishing, Geneva, Switzerland, pp. 25-38.
D.O.I.:
10.1007/978-3-319-13311-9_3
Book title:
Law, development and innovation
Editors:
Prof. Dr Giuseppe Bellantuono (University of Trento, Italy)
Prof. Fabiano Teodoro de Rezende Lara (Universidade Federal de Minas Gerais, Brazil)
Year:
2015
Series title:
SxI - Springer for Innovation \ SxI - Springer per l’Innovazione
Series volume:
13
Edition:
1st
Publisher:
Springer International Publishing
Copyright holder:
Springer International Publishing Switzerland
Pages:
222
ISSN (series):
2239-2688
D.O.I.:
10.1007/978-3-319-13311-9
ISBN (print):
978-3-319-13310-2
ISBN (electronic):
978-3-319-13311-9
This document discusses potential competition law issues regarding social media platforms, focusing on Facebook. It begins by providing context on competition law cases in the IT sector, noting Facebook has not faced antitrust scrutiny yet. It then summarizes the rise of social media and Facebook's dominance in the field. The document outlines how market definition is complicated for social media by its two-sided nature. It proposes adapting the SSNIP test to evaluate quality over price for free services. The analysis will then identify if Facebook holds a dominant position and potential exploitative or exclusionary abuses of that position under EU competition law.
In many organizations, decisions are taken by unanimity giving each member veto power. We analyze a model of an organization in which members with heterogenous productivity privately contribute to a common good. Under unanimity, the least efficient member imposes her preferred effort choice on the entire organization. The threat of forming an "inner organization" can undermine the veto power of the less efficient members and coerce them to exert more effort. We also identify the conditions under which the threat of forming an inner organization is executed. Finally, we show that majority rules effectively prevent the emergence of inner organizations.
Version of July 2009.
Read more research publications at: https://www.hhs.se/site
This article reports results from an experiment studying how fines, leniency and rewards for whistleblowers affect cartel formation and prices. Antitrust without leniency reduces cartel formation but increases cartel prices: subjects use costly fines as punishments. Leniency improves antitrust by strengthening deterrence but stabilizes surviving cartels: subjects appear to anticipate the lower post-conviction prices after reports/leniency. With rewards, prices fall at the competitive level. Overall our results suggest a strong cartel deterrence potential for well-run leniency and reward schemes. These findings may also be relevant for similar white-collar organized crimes, like corruption and fraud.
We present results from a laboratory experiment identifying the main channels through which different law enforcement strategies deter organized economic crime. The absolute level of a fine has a strong deterrence effect, even when the exogenous probability of apprehension is zero. This effect appears to be driven by distrust or fear of betrayal, as it increases significantly when the incentives to betray partners are strengthened by policies offering amnesty to “turncoat whistleblowers”. We also document a strong deterrence effect of the sum of fines paid in the past, which suggests a significant role for salience or availability heuristic in law enforcement.
Tutkimuksessa tarkastellaan työmarkkinoiden polarisoitumista Suomessa. Aiemmat tutkimukset tarkastelevat kehitystä koko talouden, toimialojen tai alueiden tasolla. Tutkimuksessa tarkastellaan työpaikkojen rakennemuutosta yritystasolla. Tulokset osoittavat, että rutiiniluonteiset työtehtävät ovat vähentyneet merkittävästi suomalaisissa yrityksissä. Palkkajakauman keskivaiheilla olevien rutiiniluonteisten työtehtävien väheneminen kytkeytyy informaatio- ja kommunikaatioteknologian käyttöönottoon yrityksissä.
Public procurement is the purchase by governments of goods, services and works and accounts for 13% of GDP in OECD member countries. It is the government activity most vulnerable to waste, fraud and corruption. Integrity in public procurement is essential in maintaining citizens’ trust in government. More information at www.oecd.org/gov/ethics/procurement
To avoid strikes and curb labour militancy, some governments have introduced legislation stating that union leadership as well as wage offers should be decided through union-wide ballots. This paper shows that members still have incentives to appoint militant union leaders, if these leaders have access to information critical for the members' voting decisions. Furthermore, conflicts may arise in equilibrium even though the contract zone is never empty and there is an option to resolve any incomplete information. Ballot requirements hence preclude neither militant union bosses nor inefficient conflicts.
- The document summarizes research conducted by Stephen Ashcroft on barriers to implementing e-procurement in local UK governments in late 2004.
- Key findings from the research included that procurement is not seen as strategic, central government e-procurement targets will likely not be met, and e-procurement strategies are rarely documented.
- There is also confusion over what constitutes e-procurement, as initiatives like purchasing cards were sometimes identified as e-procurement when they are only partial implementations.
The growth and scale of informal employment in many developing countries has been traditionally attributed to the displacement of workers into insecure forms of labour market attachment as the only feasible alternative to unemployment (Fields, 1975; Mazumdar, 1976). More recently a number of authors (Pradhan and van Soest, 1995, 1997; Cohen and House, 1996; Marcoullier et al., 1997; Maloney, 1999; Saavedra and Chong, 1999; Gong and van Soest, 2002) question this interpretation of informality, by calling into doubt the idea that the existence of informal and formal sectors is a manifestation of “dualism” in the labour market.
A further strand of research has highlighted the dynamic “micro-entrepreneurial” nature of informal economic activity (Cunningham and Maloney, 2001; Maloney, 2004; Pisani and Pagan, 2004). This view of informality is well-established and can be traced back to the work of Hart (1972). A final view (and one which we do not address in the present paper) concerns the relationship between informality and illegal or tax-evading activity (see Gerxhani, 2004, and Loayza et al., 2005). Each of these alternative views shares in common the idea that informal activity may be freely chosen by some workers.
These individuals either perceive state social protection to be poor “value for money” or do not wish to have the conditions of their employment relationship (such as hours of work) restricted by tight state labour market regulation. Alternatively, they may be attracted by the prospective job satisfaction or income stream associated with a successful transition into entrepreneurship, or may perceive the relative benefits of illegal or unregistered activity to outweigh the risks of detection.
The size of the informal sector is of particular interest to economic policy makers concerned to promote the development of a micro-entrepreneurial sector. This concern arises because of its perceived contribution to dynamic economic efficiency, possibly as a response to growing competitive pressures brought about by trade liberalization.
On the other hand policy makers may be concerned that significant numbers, perhaps even a majority of workers in developing countries have little or no social security provision. This means that they have little on which to fall back in the event of illness, unemployment or old age, beyond personal wealth and extended family support. A narrower but nevertheless important concern may be to reduce informality in order to widen the base of direct taxation.
This discussion of alternative perspectives on informality brings into sharp focus the question of the most appropriate way to define and measure the informal sector. This is a question which has attracted little or no detailed attention in the literature. The purpose of the present paper is to attempt to redress this. This lack of attention may arise from the paucity of data on a sector which by its nature is problematic to define.
8. the appropriate legal standard and sufficient economic evidence for exclu...Matias González Muñoz
This document summarizes a paper analyzing the legal standard and economic evidence used in the FTC's case against McWane regarding exclusive dealing. It discusses the dissenting opinion of Commissioner Wright, who argued for a heightened legal standard requiring "clear evidence" of harm to competition. The authors argue this standard is too high and could lead to under-enforcement. They also analyze the economic theories of harm from exclusive dealing and the evidence presented in the case. The authors conclude Commissioner Wright's proposed standard is not appropriate and would weaken antitrust enforcement.
The document presents a theoretical political-economic model that analyzes how corruption and foreign direct investment (FDI) interact to determine an optimal institutional policy level in a developing country. There are two types of people - honest people who work in the private sector, and dishonest people who work for the corrupt civil service. The model considers the costs to firms of paying taxes through both legal and illegal structures, and how the institutional policy level affects these costs. The optimal policy level depends on the relative efficiency of the legal versus illegal structures, as well as the degree of corruption in the political process and the size of political contributions from dishonest lobby groups.
This paper focuses on the share and incidence of nominal and real wages cuts in the Finnish private sector. It complements other analyses of downward wage rigidities especially by looking for individual and employer characteristics that might explain the likelihood of observing an individual’s wage cut. The examinations are based on Probit models that include individual characteristics, employer characteristics, and the form of remuneration as explanatory variables. We find relatively few individual or employer characteristics that have a strong and common influence on the likelihood of wage decline across the different segments of labour markets. However, the full-time workers have had a lower likelihood of nominal and real wage declines during the 1990s compared with part-time workers. Declines in wages have also been more common in small plants/firms. In addition, nominal wage declines have been more transitory by their nature within the segments of the Finnish labour markets in which they are more common. Overall, the frequency of nominal wage declines has been fairly low for manufacturing nonmanuals and service sector workers but somewhat higher for manual workers in manufacturing. However, nominal wage moderation together with a positive inflation rate produced real wage cuts for a large proportion of employees during the worst recession years of the early 1990s.
Essays on economic analysis of competition law: theory and practice (Ph.D. di...Dr Danilo Samà
Essays on economic analysis of competition law: theory and practice
Author:
Dr Danilo Samà (LUISS “Guido Carli” University, Law & Economics LAB)
Abstract:
The Ph.D. dissertation, submitted to LUISS “Guido Carli” University of Rome in fulfillment of the requirements for the Degree of Doctor of Philosophy in Economic Analysis of Competition Law (XXV cicle), is the result of a scientific research in the field of the economic analysis of competition law developed through academic experiences at the Erasmus Rotterdam University in the Netherlands, the Ghent University in Belgium, the University of Hamburg in Germany and the Toulouse School of Economics in France, as well as through professional experiences as competition economist at the Antitrust Department of Pavia & Ansaldo and the Directorate-General for Competition (DG COMP) of the European Commission.
Keywords:
antitrust, competition economics, competition law, competition policy
JEL classification:
B21; C01; K21; L00; L4
Year:
2014
Pages:
1-40
Citation:
Samà, Danilo (2014), Essays on economic analysis of competition law: theory and practice, Law & Economics LAB, LUISS “Guido Carli” University, Rome, Italy, pp. 1-40.
Modern antitrust engenders a possible conflict between public and private enforcement due to the central role of Leniency Programs. Damage actions may reduce the attractiveness of Leniency Programs for cartel participants if their cooperation with the competition authority increases the chance that the cartel’s victims will bring a successful suit. A long legal debate culminated in a EU directive, adopted in November 2014, which seeks a balance between public and private enforcement. It protects the efectiveness of a Leniency Program by preventing the use of leniency statements in subsequent actions for damages and by limiting the liability of the immunity recipient to its direct and indirect purchasers. Our analysis shows such compromise is not required: limiting the cartel victims’ ability to recover their loss is not necessary to preserve the eectiveness of a Leniency Program and may be counterproductive. We show that damage actions will actually improve its eectiveness, through a legal regime in which the civil liability of the immunity recipient is minimized (as in Hungary) and full access to all evidence collected by the competition authority, including leniency statements, is granted to claimants (as in the US).
Check the latest research publications and presentations on our website http://www.hhs.se/site
We examine the effects of bank deregulation on the spatial dynamics of retail-bank branching, exploiting, much like a quasi-natural experiment, the context of intense liberalization
reforms in Belgium in the late nineties. Using fine-grained data on branch network dynamics within the metropolitan area of Antwerp and advancing novel spatial econometric techniques, we show that these liberalization reforms radically shifted and accelerated branch network dynamics. Entry and exit dynamics substantially intensified, the level change in financial void grew significantly, and bank choice markedly declined. Moreover, all these changes consistently extended (even with greater intensity) after the liberalization peak. However, the immediate and longer-term spatial ramifications of the financial sector liberalization were very distinct. All immediate changes systematically, differentially impacted the poorer and wealthier neighborhoods, disenfranchising the poorer neighbourhoods and favoring their wealthier counterparts. The longer-term e¤ects on spatial patterns of change no longer exhibited this systematic relationship with neighborhood income. We draw out the policy implications of our findings.
The effectiveness of competition policy: an econometric assessment in develop...Dr Danilo Samà
The effectiveness of competition policy: an econometric assessment in developed and developing countries
Author:
Dr Danilo Samà (LUISS “Guido Carli” University, Law & Economics LAB)
Abstract:
The ultimate objective of the present paper is to empirically investigate the effectiveness of competition policy in developed and developing countries. Although its importance is continuously increasing, the effectiveness of competition policy still seems to lack the attention that it would deserve. At the present state of art, the number of academic contributions that attempts to estimate its impact on relevant economic variables appears very limited, in particular for the less developed countries. However, an empirical literature aimed at measuring in objective terms the effect of competition policy on economic growth is emerging, starting from narrow variables of interest, such as Gross Domestic Product and Total Factor Productivity. As a result, the principal aim of the current work is to contribute to this branch of research, focusing on broader indicators of market performance, in order to understand whether the presence of an antitrust authority has a significant impact, thus an effective utility, on the level of competition of a country.
Keywords:
competition authorities, competition policy, developed countries, developing countries, economic development, economic growth, law & economics, market concentration, market efficiency, market performance, new institutional economics, political economy
JEL classification:
C21; C26; K21; L40
Year:
2013
Pages:
1-50
Citation:
Samà, Danilo (2013), The effectiveness of competition policy: an econometric assessment in developed and developing countries, Law & Economics LAB, LUISS “Guido Carli” University, Rome, Italy, pp. 1-50.
Since coming into office two years ago, Chinese President Xi Jinping has carried out a sweeping, highly publicized anticorruption campaign. Skeptics are debating whether the campaign is biased towards Mr. Xi’s rivals, and even possibly related to the current economic slowdown. What is less debated is the next stage of Mr. Xi’s anti-corruption strategy, which is going to alter the legal statutes. Amendment IX, proposed in October 2014, includes heavier penalties, but two important tools in the fight of corruption – one-sided leniency and asymmetric punishment – became more limited and discretional. We argue that studying a 1997 reform and its effects can shed some light onto why the Chinese leadership seems dissatisfied with the current legislation and the likely effects of the proposed changes.
Leniency policies and asymmetric punishment are regarded as potentially powerful anticorruption
tools, also in the light of their success in busting price-fixing cartels. It has been
argued, however, that the introduction of these policies in China in 1997 has not helped
fighting corruption. Following up on this view, the Central Committee of the Chinese Communist
Party passed, in November 2015, a reform introducing heavier penalties, but also
restrictions to leniency. Properly designing and correctly evaluating these policies is difficult.
Corruption is only observed if detected, and an increase in convictions is consistent
with both reduced deterrence or improved detection. We map the evolution of the Chinese
anti-corruption legislation, collect data on corruption cases for the period 1986-2010, and
apply a new method to identify deterrence effects from changes in detected cases developed
for cartels by Miller (2009). We document a large and stable fall in corruption cases
starting immediately after the 1997 reform, consistent with a negative effect of the reform
on corruption detection, but under specific assumptions also with increased deterrence. To
resolve this ambiguity, we collect and analyze a random sample of case files from corruption
trials. Results point to a negative effect of the 1997 reform, linked to the increased leniency
also for bribe-takers cooperating after being denounced. This likely enhanced their ability
to retaliate against reporting bribe-givers – chilling detection through whistleblowing – as
predicted by theories on how these programs should (not) be designed.
Leniency policies offering immunity to the first cartel member that blows the whistle and self-reports to the antitrust authority have become the main instrument in the fight against cartels around the world. In public procurement markets, however, bid-rigging schemes are often accompanied by corruption of public officials. In the absence of coordinated forms of leniency for unveiling corruption, a policy offering immunity from antitrust sanctions may not be sufficient to encourage wrongdoers to blow the whistle, as the leniency recipient will then be exposed to the risk of conviction for corruption. Explicitly introducing leniency policies for corruption, as has been recently done in Brazil and Mexico, is only a first step. To increase the effectiveness of leniency in multiple offense cases, we suggest, besides extending automatic leniency to individual criminal sanctions, the creation of a ‘one-stop-point’ enabling firms and individuals to report different crimes simultaneously and receive leniency for all of them at once if they are entitled to it.
We use a novel approach to address the question of whether a union of sovereign countries can efficiently raise and allocate a budget, even when members are purely self-interested and participation is voluntary. The main innovation of our model is to explore the link between budget contributions and allocation that arises when countries bargain over union outcomes. This link stems from the distribution of bargaining power being endogenously determined. Generically, it follows that unstructured bargaining gives an inefficient result. We find, however, that efficiency is achieved with fully homogenous countries, and when countries have similar incomes and the union budget is small. Moreover, some redistribution arises endogenously, even though nations are purely self-interested and not forced to participate in the union. A larger union budget, however, entails a trade-off between equality and efficiency. We also analyze alternative institutions and find that majority rule can improve efficiency if nations who prefer projects with high public good spillovers are endogenously selected to the majority coalition. Exogenous tax rules, such as the linear tax rule in the EU, which is designed to increase efficiency on the contribution margin, can also improve overall efficiency despite decreasing the efficiency of the allocation of funds.
Is competition policy useful for emerging countries? An empirical analysisDr Danilo Samà
Is competition policy useful for emerging countries? An empirical analysis
Authors:
Prof. Emeritus Roberto Pardolesi (LUISS “Guido Carli” University of Rome, Law & Economics LAB)
Dr Danilo Samà (CDC Cartel Damage Claims, Law & Economics LAB)
Abstract:
The ultimate objective of the paper is to empirically investigate the effectiveness of competition policy in emerging countries, focusing on broader indicators of market performance in order to understand whether the presence of an antitrust authority has a significant impact, hence an effective utility, on the level of competition of a developing country. From a policy perspective, the aim of the paper is also to assess whether the enforcement of a competition policy regime in a developing country has the same beneficial effects on the intensity of competition usually claimed to take place in the most developed countries. Relying upon a dataset and the connected econometric model developed by one of the authors, we provisionally conclude that in developing countries the institutional quality of the competition authorities matters more than the mere existence or the degree of competence for the effectiveness of a competition policy regime.
Keywords:
competition authorities, competition policy, developing countries, economic development, economic growth, law & economics, market concentration, market efficiency, market performance, new institutional economics, political economy
JEL classification:
C21; C26; K21; L40
Year:
2015
Pages:
25-38
Citation:
Pardolesi, Roberto, Samà, Danilo (2015), Is competition policy useful for emerging countries? An empirical analysis, in Bellantuomo, Giuseppe, de Rezende Lara, Fabiano Teodoro (eds.), Law, development and innovation, SxI - Springer for Innovation \ SxI - Springer per l’Innovazione, Vol. 13, Springer International Publishing, Geneva, Switzerland, pp. 25-38.
D.O.I.:
10.1007/978-3-319-13311-9_3
Book title:
Law, development and innovation
Editors:
Prof. Dr Giuseppe Bellantuono (University of Trento, Italy)
Prof. Fabiano Teodoro de Rezende Lara (Universidade Federal de Minas Gerais, Brazil)
Year:
2015
Series title:
SxI - Springer for Innovation \ SxI - Springer per l’Innovazione
Series volume:
13
Edition:
1st
Publisher:
Springer International Publishing
Copyright holder:
Springer International Publishing Switzerland
Pages:
222
ISSN (series):
2239-2688
D.O.I.:
10.1007/978-3-319-13311-9
ISBN (print):
978-3-319-13310-2
ISBN (electronic):
978-3-319-13311-9
This document discusses potential competition law issues regarding social media platforms, focusing on Facebook. It begins by providing context on competition law cases in the IT sector, noting Facebook has not faced antitrust scrutiny yet. It then summarizes the rise of social media and Facebook's dominance in the field. The document outlines how market definition is complicated for social media by its two-sided nature. It proposes adapting the SSNIP test to evaluate quality over price for free services. The analysis will then identify if Facebook holds a dominant position and potential exploitative or exclusionary abuses of that position under EU competition law.
In many organizations, decisions are taken by unanimity giving each member veto power. We analyze a model of an organization in which members with heterogenous productivity privately contribute to a common good. Under unanimity, the least efficient member imposes her preferred effort choice on the entire organization. The threat of forming an "inner organization" can undermine the veto power of the less efficient members and coerce them to exert more effort. We also identify the conditions under which the threat of forming an inner organization is executed. Finally, we show that majority rules effectively prevent the emergence of inner organizations.
Version of July 2009.
Read more research publications at: https://www.hhs.se/site
This article reports results from an experiment studying how fines, leniency and rewards for whistleblowers affect cartel formation and prices. Antitrust without leniency reduces cartel formation but increases cartel prices: subjects use costly fines as punishments. Leniency improves antitrust by strengthening deterrence but stabilizes surviving cartels: subjects appear to anticipate the lower post-conviction prices after reports/leniency. With rewards, prices fall at the competitive level. Overall our results suggest a strong cartel deterrence potential for well-run leniency and reward schemes. These findings may also be relevant for similar white-collar organized crimes, like corruption and fraud.
We present results from a laboratory experiment identifying the main channels through which different law enforcement strategies deter organized economic crime. The absolute level of a fine has a strong deterrence effect, even when the exogenous probability of apprehension is zero. This effect appears to be driven by distrust or fear of betrayal, as it increases significantly when the incentives to betray partners are strengthened by policies offering amnesty to “turncoat whistleblowers”. We also document a strong deterrence effect of the sum of fines paid in the past, which suggests a significant role for salience or availability heuristic in law enforcement.
Tutkimuksessa tarkastellaan työmarkkinoiden polarisoitumista Suomessa. Aiemmat tutkimukset tarkastelevat kehitystä koko talouden, toimialojen tai alueiden tasolla. Tutkimuksessa tarkastellaan työpaikkojen rakennemuutosta yritystasolla. Tulokset osoittavat, että rutiiniluonteiset työtehtävät ovat vähentyneet merkittävästi suomalaisissa yrityksissä. Palkkajakauman keskivaiheilla olevien rutiiniluonteisten työtehtävien väheneminen kytkeytyy informaatio- ja kommunikaatioteknologian käyttöönottoon yrityksissä.
Public procurement is the purchase by governments of goods, services and works and accounts for 13% of GDP in OECD member countries. It is the government activity most vulnerable to waste, fraud and corruption. Integrity in public procurement is essential in maintaining citizens’ trust in government. More information at www.oecd.org/gov/ethics/procurement
To avoid strikes and curb labour militancy, some governments have introduced legislation stating that union leadership as well as wage offers should be decided through union-wide ballots. This paper shows that members still have incentives to appoint militant union leaders, if these leaders have access to information critical for the members' voting decisions. Furthermore, conflicts may arise in equilibrium even though the contract zone is never empty and there is an option to resolve any incomplete information. Ballot requirements hence preclude neither militant union bosses nor inefficient conflicts.
- The document summarizes research conducted by Stephen Ashcroft on barriers to implementing e-procurement in local UK governments in late 2004.
- Key findings from the research included that procurement is not seen as strategic, central government e-procurement targets will likely not be met, and e-procurement strategies are rarely documented.
- There is also confusion over what constitutes e-procurement, as initiatives like purchasing cards were sometimes identified as e-procurement when they are only partial implementations.
The growth and scale of informal employment in many developing countries has been traditionally attributed to the displacement of workers into insecure forms of labour market attachment as the only feasible alternative to unemployment (Fields, 1975; Mazumdar, 1976). More recently a number of authors (Pradhan and van Soest, 1995, 1997; Cohen and House, 1996; Marcoullier et al., 1997; Maloney, 1999; Saavedra and Chong, 1999; Gong and van Soest, 2002) question this interpretation of informality, by calling into doubt the idea that the existence of informal and formal sectors is a manifestation of “dualism” in the labour market.
A further strand of research has highlighted the dynamic “micro-entrepreneurial” nature of informal economic activity (Cunningham and Maloney, 2001; Maloney, 2004; Pisani and Pagan, 2004). This view of informality is well-established and can be traced back to the work of Hart (1972). A final view (and one which we do not address in the present paper) concerns the relationship between informality and illegal or tax-evading activity (see Gerxhani, 2004, and Loayza et al., 2005). Each of these alternative views shares in common the idea that informal activity may be freely chosen by some workers.
These individuals either perceive state social protection to be poor “value for money” or do not wish to have the conditions of their employment relationship (such as hours of work) restricted by tight state labour market regulation. Alternatively, they may be attracted by the prospective job satisfaction or income stream associated with a successful transition into entrepreneurship, or may perceive the relative benefits of illegal or unregistered activity to outweigh the risks of detection.
The size of the informal sector is of particular interest to economic policy makers concerned to promote the development of a micro-entrepreneurial sector. This concern arises because of its perceived contribution to dynamic economic efficiency, possibly as a response to growing competitive pressures brought about by trade liberalization.
On the other hand policy makers may be concerned that significant numbers, perhaps even a majority of workers in developing countries have little or no social security provision. This means that they have little on which to fall back in the event of illness, unemployment or old age, beyond personal wealth and extended family support. A narrower but nevertheless important concern may be to reduce informality in order to widen the base of direct taxation.
This discussion of alternative perspectives on informality brings into sharp focus the question of the most appropriate way to define and measure the informal sector. This is a question which has attracted little or no detailed attention in the literature. The purpose of the present paper is to attempt to redress this. This lack of attention may arise from the paucity of data on a sector which by its nature is problematic to define.
8. the appropriate legal standard and sufficient economic evidence for exclu...Matias González Muñoz
This document summarizes a paper analyzing the legal standard and economic evidence used in the FTC's case against McWane regarding exclusive dealing. It discusses the dissenting opinion of Commissioner Wright, who argued for a heightened legal standard requiring "clear evidence" of harm to competition. The authors argue this standard is too high and could lead to under-enforcement. They also analyze the economic theories of harm from exclusive dealing and the evidence presented in the case. The authors conclude Commissioner Wright's proposed standard is not appropriate and would weaken antitrust enforcement.
The document presents a theoretical political-economic model that analyzes how corruption and foreign direct investment (FDI) interact to determine an optimal institutional policy level in a developing country. There are two types of people - honest people who work in the private sector, and dishonest people who work for the corrupt civil service. The model considers the costs to firms of paying taxes through both legal and illegal structures, and how the institutional policy level affects these costs. The optimal policy level depends on the relative efficiency of the legal versus illegal structures, as well as the degree of corruption in the political process and the size of political contributions from dishonest lobby groups.
This paper focuses on the share and incidence of nominal and real wages cuts in the Finnish private sector. It complements other analyses of downward wage rigidities especially by looking for individual and employer characteristics that might explain the likelihood of observing an individual’s wage cut. The examinations are based on Probit models that include individual characteristics, employer characteristics, and the form of remuneration as explanatory variables. We find relatively few individual or employer characteristics that have a strong and common influence on the likelihood of wage decline across the different segments of labour markets. However, the full-time workers have had a lower likelihood of nominal and real wage declines during the 1990s compared with part-time workers. Declines in wages have also been more common in small plants/firms. In addition, nominal wage declines have been more transitory by their nature within the segments of the Finnish labour markets in which they are more common. Overall, the frequency of nominal wage declines has been fairly low for manufacturing nonmanuals and service sector workers but somewhat higher for manual workers in manufacturing. However, nominal wage moderation together with a positive inflation rate produced real wage cuts for a large proportion of employees during the worst recession years of the early 1990s.
The study explores the empirical determination of perceived job instability in European labour markets. The study is based on the large-scale survey from the year 1998 covering the 15 member states of the European Union and Norway. There are evidently large differences in the amount of perceived job instability from country to country. The lowest level of perceived job instabity is in Denmark (9%). In contrast, the highest level of perceived job instability is in Spain (63%). The results show that perceived job instability increases with age. Educational level, on the other hand, does not correlate strongly with the perception of job instability. There are no differences in the perceptions of job instability between males and females. An occurrence of unemployment during the past five years yields a substantial rise in the perception of job instability. The empirical finding that unemployment history strongly matters for the perception of job instability is consistent with the notion that an unemployment episode provides otherwise private information about unobservable productivity of an employee. The most striking result is that a temporary contract as such does not yield an additional increase to the perception of job instability at the individual level of the economy. However, the perception of job instability is more common within manufacturing industries. In addition, the perception of job instability by employees increases according to the size of the firm. There are also strong country effects.
This paper studies the effects of school choice on segregation. We analyze the effect of a reform in Stockholm that changed the admission system of public upper secondary schools. Before the year 2000, students were assigned to their nearest school, but from the fall of 2000 and onwards, the students can apply to any school within Stockholm City and admission decisions are based on grades only. We show that the distribution of students over schools changed dramatically as a response to extending school choice. As expected, the new admission policy increased segregation by ability. However, segregation by family background, as well as, segregation between immigrants and natives also increased significantly.
In the case considered, risk averse firms agree in advance to share R&D results but not R&D costs. Real R&D expenditure is unobservable, which creates a moral hazard problem. The firms contract at the first stage on the intensity of cooperation and at the secong stage on the research effort. Moral hazard weakens the firms´ motives to invest in R&D during cooperation. But diversifying the portfolio of R&D projects through cooperation increases firms´ utility. It turns out that in the absence of monitoring, the firms choose either high effort and low intensity of cooperation. If a firm can monitor a partner´s real R&D effort through a signal, moral hazard can weaken to an extent that risk averse and independent firms choose high effort and maximal intensity of cooperation, even if they were indifferent between high effort and low effort under isolation.
This study considers the impact of M&As on a firm’s R&D investments. We have analysed the impacts of the incidences in which a firm becomes a target and, on the other hand, an acquirer. M&As are classified in our study as being either domestic or cross-border. In addition, domestic M&As are classified – if needed – according to geographical and technological proximity. The results obtained show that M&As tend to increase acquirers’ R&D investments, and decrease targets’ R&D investments or keep them unchanged. The clearest positive effect is related to the incidence in which a Finnish firm buys a foreign firm. On the other hand, when a foreign firm buys a Finnish firm, the impact is zero.
This paper explores the effects of outsourcing on employee well-being through the use of the Finnish linked employer-employee data. The direct negative effect of outsourcing is attributable to greater job destruction and worker outflow. In terms of perceived well-being, the winners in international outsourcing are those who are capable of performing interactive tasks (i.e., managers, professionals and experts), especially when offshoring involves closer connections to other developed countries.
Palkansaajien tutkimuslaitos on tehnyt ennusteen teollisuuden, rakentamisen, kuljetuksen, informaatiopalveluiden sekä liike-elämän palveluiden kehityksestä vuoteen 2017 asti. Näiden toimialojen tuotanto kasvaa tänä vuonna keskimäärin vajaan prosentin viime vuodesta. Pelkästään teollisuuden (pl. elintarviketeollisuus) tuotanto supistuu 0,6 prosenttia. Viennin vauhdittuminen vuosina 2016 ja 2017 näkyy tarkasteltavien toimialojen tuotannon lähivuosien kasvussa. Yhteen laskien kyseiset toimialat kasvavat ensi vuonna ja vuonna 2017 noin kolme prosenttia. Tehdasteollisuudessa kasvu jää tätä puoli prosenttiyksikköä hitaammaksi. Venäjän viennin jyrkkä supistuminen näyttää olevan pääsyy siihen, miksi teollisuutemme kasvu on vuodesta 2014 lähtien ollut muita Euroopan maita hitaampaa.
In recent years temporary agency work (TAW) has rapidly been expanding in Finland. This has shown both in the increase of the number of temporary agency workers and of
the number of user firms as well as in the growth of industry’s business turnover. Reliance on temporary agency work in Finland is still quite modest. In 1999 the share of temporary agency workers of all labour force in Finland was around 1.2 per cent, i.e. around 31 200 workers, whereas the corresponding share in Europe was on average 2.5 per cent. Around 15 000 of these workers had temporary agency work as their major source of living. The number of temporary agency firms was around 170, of which nearly half operated in the entertainment industry. The business turnover of the whole
industry in 1999 was around 1.08 billion FIM. In addition to hiring labour, some Finnish temporary agencies have broadened their scope of operation to include other services
as well (e.g. recruitment, outsourcing).
Suomalainen hyvinvointivaltio kuuluu monella mittarilla maailman huippujen joukkoon. Nyt kuitenkin se on tullut käännekohtaansa. Maan talousahdingon ja julkisen talouden velkaantumisen nimissä tulee monilta tahoilta vaatimuksia, että julkista sektoria on ajettava alas. Sosiaaliturvaa ja hyvinvointipalveluja on leikattava. Seuraavat eduskuntavaalit ja hallitusohjelma voivat ratkaista kehityksen suunnan.
Mutta mitä kello on lyönyt? Mikä oikeasti on hyvinvointivaltiomme nykytila? Mitä puutteita siinä on, onko sitä pakko ajaa alas, vai onko sitä mahdollista kehittää edelleen? Näitä ja monia muita hyvinvointivaltioon liittyviä kysymyksiä pohtivat tässä kirjassa maamme huippuasiantuntijat. He ovat saaneet vapaat kädet nostaa esiin tärkeimpiä asioita omilta aloiltaan.
Tutkimuksen perustavoitteena on verrata suomalaisen palkansaajan palkkatasoa eri näkökulmista lähinnä eri EU-maissa työskentelevien palkansaajien palkkoihin. Tiedon lähteenä on EU:n tulo- ja elinolotutkimuksen aineisto eli ns. EU-SILC -aineisto. Suurin osa vertailuista on tehty kokoaikaisille palkansaajille. Tuoreimmat tiedot ovat vuodelta 2011.
Nykyisten EU-maiden joukossa Suomen kokoaikaisten palkansaajien keskimääräi-nen palkkataso, 3132 euroa kuukaudessa vuonna 2011, on EU-keskitasoa korkeampi. Palkkataso on Suomea korkeampi esimerkiksi Tanskassa ja Alankomaissa. Myös Ruot-sissa palkkataso on hieman Suomea korkeampi, mutta ero on hyvin pieni. Saksassa palkat ovat jonkin verran Suomea matalampia. Hintatasoerojen huomioon ottaminen muuttaa Suomen ja Ruotsin sekä Suomen ja Saksan välisen järjestyksen.
Suomessa palkkojen hajonta on vertailumaiden joukossa neljänneksi pienintä. Vähäisintä se on Tanskassa. Baltian maat ja Saksa ovat maita, joissa korkeiden ja matalien palkkojen väliset erot ovat suuria. Näitä maita yhdistää se, että palkoista sovitaan varsin hajautetusti. Toisaalta pienen palkkahajonnan omaavissa maissa, kuten Pohjoismaissa, palkkasopimukset tehdään koordinoidusti.
Suomi on maa, jossa matalapalkkaisuutta on suhteellisen vähän. Määriteltäessä matalapalkkatyö työksi, josta saatava palkka on 2/3-osaa mediaanipalkasta, matalapalkkaisuuden rajaksi tulee Suomessa noin 1900 euroa. Heitä oli kokoaikaisista työn-tekijöistä vuonna 2011 noin 15 prosenttia. Esimerkiksi Saksassa matalapalkkatöissä oli selvästi enemmän työntekijöitä, 23 prosenttia kokoaikaisista työntekijöistä.
Sukupuolten välisessä palkkaerovertailussa Suomi kuuluu suhteellista palkkaeroa mittarina käytettäessä vertailumaiden puoliväliin. Suhteellinen palkkaero naisten ja miesten välillä vaihtelee runsaan 70 ja 90 prosentin välillä. Suomessa se oli vuonna 2011 84 prosenttia.
Suomessa korkeasti koulutettujen palkat ovat suhteellisen matalia ja vähemmän koulutusta saaneiden palkat suhteellisen korkeita. Toisaalta esimerkiksi Ruotsi on maa, jossa vähemmän koulutusta saaneiden palkat ovat korkeampia kuin Suomessa.
Palkat eivät välttämättä nouse iän myötä. Isossa-Britanniassa, Tanskassa ja Saksassa keski-ikäiset ovat parhaiten ansaitseva ikäryhmä. Suomessa ja Norjassakin vanhin ikäryhmä ansaitsee vain vähän enemmän kuin keski-ikäiset. Virossa nuoret ansaitsevat yli 54-vuotiaita enemmän.
Talouskriisivuosien erityispiirre on ollut se, että joissain maissa nimellispalkat ovat laskeneet. Selvintä lasku on ollut Kreikassa, mutta keskimääräinen palkkataso on laskenut myös Espanjassa, Portugalissa ja Irlannissa.
Vuoden 2003 alusta lähtien työnantajan sosiaaliturvamaksu poistettiin kokeiluluonteisesti kolmeksi vuodeksi kahdenkymmenen Pohjois-Lapin ja saaristokunnan alueella toimivilta yrityksiltä. Kokeilun tarkoituksen on selvittää työnantajamaksun poistamisen vaikutuksia työllisyyteen.
Tämä väliraportti on ensimmäinen osa kokeilun vaikutuksia arvioivasta tutkimuksesta. Raporttiin on koottu tietoja kokeilualueen yritysten työllisyyskehityksestä kokeilua edeltä-
vältä ajalta. Raportissa kuvataan myös sotu-maksualennuksen kohdentumista erityppisiin yrityksiin, eri alueille ja eri toimialoille. Raportin keskeisin sisältö on kuitenkin kokeilun
yksityiskohtainen arviointisuunnitelma. Sotu-maksualennuksen rajoittaminen koskemaan vain tiettyjen kuntien alueella toimivia
yrityksiä tarjoaa erinomaisen mahdollisuuden sotumaksualennuksen vaikutusten arvioimiselle.
Tässä tutkimuksessa sotu-maksuvapautuksen vaikutuksia arvioidaan vertaamalla kokeilualueiden työllisyyskehitystä elinkeinorakenteeltaan ja työttömyystilanteeltaan samanlaisten
vertailualueiden työllisyyskehitykseen. Lisäksi vertailu viedään yritys- ja toimipaikkatasolle hakemalla kullekin kokeilualueen yritykselle vertailualueelta mahdollisimman samanlainen vertailupari ja arvioidaan kokeilun vaikutuksia näitä yrityspareja vertaamalla. Tässä ensimmäisessä väliraportissa kuvataan kokeilu- ja vertailuyritysryhmien muodostaminen. Tarkoituksena on valita vertailuparit etukäteen, ennen kuin kokeilun vaikutuksista on käytettävissä tietoja. Kokeilun arviointi perustuu näiden etukäteen valittujen yritysparien
työllisyyskehityksen vertailuun.
Palkansaajien tutkimuslaitoksen talousennusteen mukaan Suomi vajoaa jyrkästi taantumaan. Kokonaistuotanto supistuu tänä vuonna 3,7 prosenttia ja ensi vuonnakin vajaan prosentin. Suurin yksittäinen syy tuotannon laskuun on viennin määrän väheneminen liki 10 prosentilla tänä vuonna, mutta myös yksityisten investointien noin 10 prosentin putoaminen on merkittävä. Ensi vuonna vienti ja investoinnit supistuvat edelleen jonkin verran. Yksityinen kulutus polkee lähes paikallaan, ja hallituksen elvytystoimet jäävät tehottomiksi. Tänä vuonna työttömyysaste nousee 7,4 prosenttiin ja ensi vuonna jo 8,8 prosenttiin. Työllisyys heikkenee kahdessa vuodessa 100 000 hengellä. Kuluttajainflaatio hidastuu selvästi, noin 1,4 prosentin tasolle.
Suomen kokonaistuotanto kasvoi viime vuonna 5,5 prosenttia. Kasvuluku oli poikkeuksellisen korkea huolimatta siitä, että toissa vuoden paperialan työseisaus selittää siitä lähes prosenttiyksikön. Hyvästä suhdanteesta kertoo myös se, että työllisten määrä kasvoi viime vuonna 42 000 henkilöllä edellisvuodesta ja että työttömyysaste aleni 0,7 prosenttiyksikköä keskimäärin 7,7 prosenttiin. Suotuisaa taloudellista kehitystä selittää finanssipolitiikan keventäminen sekä maailmantalouden ja Suomen lähimarkkinoiden hyvä suhdannetilanne. Suurin yllätys suhteessa konsensusennusteisiin oli Suomen ja Euroopan kasvunäkymien säilyminen kohtuullisen hyvinä huolimatta USA:n talouskasvun selvästä hidastumisesta. Palkansaajien tutkimuslaitos arvioi, että suhdannetilanne pysyy jatkossakin verraten hyvänä. Tämän mukaan Suomen kokonaistuotanto kasvaa tänä vuonna 3,5 prosenttia ja ensi vuonna 3,2 prosenttia.
Tutkimuksessa tarkastellaan, miten hyvin sosiaaliturvan tulosidonnaisuutta vähentävät toimenpiteet parantavat työn vastaanottamisen kannustimia. Laskemme JUTTA-mikrosimulaatiomallin avulla myös, millaisia vaikutuksia sosiaaliturvan muutoksilla on valtiontalouteen ja tulonjakoon. Tarkastelemamme kannustinpaketti kohentaa pienituloisten ja erityisesti yksinhuoltajien, eli niiden jotka tyypillisesti ovat pahimmissa työttömyysloukuissa, saamaa nettotulohyötyä heidän työllistyessään. Lisäksi vertaamme kannustinpaketin vaikutuksia yleiseen työtuloverojen alennukseen ja sosiaaliturvan perustasoa nostavaan köyhyyspakettiin. Annamme myös suuntaa-antavia arvioita toimenpiteiden työllisyysvaikutuksista.
This document summarizes a theoretical research study comparing public versus private production of publicly funded services. The key points are:
1) The social impact of a service depends on how well it satisfies unforeseen individual needs, which are only observed by the service provider after a contract is signed.
2) Auctioning a contract to a private provider selects the most cost-efficient bidder, but the provider may not optimally respond to needs due to profit motives.
3) Public production better addresses needs but is less cost-efficient than private competition. Whether public or private is best involves a trade-off between these factors.
4) The study finds public production has a relative advantage when needs are
1) The study examines "second-degree moral hazard" in taxi rides, where drivers may increase fares if they think passengers won't monitor costs due to reimbursement.
2) In a field experiment, researchers took 256 taxi rides in Athens and told drivers in the "moral hazard treatment" that receipts were needed for employer reimbursement.
3) They found this treatment significantly increased overcharging rates, with passengers 13% more likely to pay unjustified higher prices, indicating second-degree moral hazard impacts service markets.
The document discusses concerns about inefficiency and bureaucracy in public sector procurement processes. It summarizes findings from reports by the International Association for Contract and Commercial Management and RAND Europe that identify weaknesses in European public procurement practices. Specifically, the reports found that public procurement is slower, twice as costly, and less profitable than private sector procurement. The reports attribute these inefficiencies to issues like a lack of accountability, poor requirements specification, lack of end-user involvement, and insufficient transparency. The document calls for reforms to public sector procurement practices to address long-standing problems and inefficiencies that have been well documented.
The document discusses the economic rationales for public sector interventions in markets, namely to address market inefficiencies and distributional concerns. It outlines two conditions for public sector intervention: 1) evidence of a market failure and 2) that the intervention will improve efficiency. Four common causes of market failure are discussed: public goods, externalities, imperfect information, and imperfect competition. The document also covers distributional concerns and how governments may intervene on equity grounds to improve outcomes for groups like the rich and poor.
1. This chapter discusses intersectoral administration and the growing reliance on privatization to deliver public services.
2. It explains the differences between sourcing, procurement contracts, and service contracts, as well as the typical reasons given for privatization such as saving money.
3. However, it also notes potential problems with privatization like lack of competition, loose contracting procedures, and accountability issues.
This document discusses a case study on the role of strategic sourcing on the performance of Jomo Kenyatta University of Agriculture and Technology. It begins with an introduction to strategic sourcing and its benefits over traditional purchasing approaches. A literature review then covers several relevant theories and factors related to strategic sourcing, including quality of goods and services, cost of goods and services, supplier relationships, and timely delivery. The study used a descriptive research design and questionnaires to collect data from university employees. The findings suggested that strategic sourcing enables strategic advantages and problem alleviation. Quality of goods and services was found to be the most important variable for performance, followed by cost, timely delivery, procurement plans, and supplier relationships. The document concludes with
This case study examines Serco's contract with Norfolk and Norwich University Hospitals NHS Foundation Trust to provide facilities management services. Key factors in the success of the partnership included early and ongoing involvement of unions in the procurement process, recognition of unions by Serco, and agreements to harmonize terms and conditions for transferred staff. Over time, Serco worked with unions to provide pay and benefits on par with directly employed NHS staff. As a result, the contract saw improved performance measures like decreased absenteeism and turnover. Customer satisfaction also remained high, leading the contract to be repeatedly renewed without rebidding.
- The concept of pure competition requires complete information availability to all market participants about prices and conditions. If full information is lacking, the market mechanism can fail.
- Transaction costs, such as the effort involved in exchanges, are another potential cause of market failure if the costs outweigh efficiency gains.
- Externalities, which are effects on third parties not involved in exchanges, can lead to market failure if their costs and benefits are not reflected in market prices. This is an important topic that will be discussed later.
Running head Economic Analysis of Business ProposalEconomic A.docxcharisellington63520
Running head: Economic Analysis of Business Proposal
Economic Analysis of Business Proposal 7
Introduction
The onus of this economic analysis paper centers around both the “Thomas Money Service Inc.” and “Will Bury’s Price Elasticity” scenarios that collectively constitute a monopolist market structure. (Crane, 2014) wrote that the market conditions and information concerning the pricing strategies, quantity to supply to the entire market, product differentiation, as well as patenting of the innovations dominate these scenarios. As a result of this, many dilemmas emerge under monopolistic markets given that the commodities produced are not complete substitutes rather close substitutes to each other. A big number of producers and product differentiation about the pricing strategies and the price elasticity of demand are the material factors that this manuscript is tasked to discuss.
Overview of the two scenarios
For the case of “Thomas Money Service Inc.”, the financing institution started providing credit lending facilities back in the year 1940 as a consumer finance firm.Between 1940 and 1945, the company increased its activities from issuing small loans to households to offering business loans, mortgages, and business acquisition financing.Early in the year 1946, a lucrative opportunity emerged of providing equipment financing supplementing the high market demand for forestry and equipment.The year 1951 was a year of opportunities where the company bought an equipment manufacturing firm. Consequently, the company suspended the funding of other equipment brands due to the increased manufacturing, selling, and financing its brand of forestry and building equipment.
On the other hand, Will Bury started as a mere worker at the High Tech Digital Industries, where he gathered necessary innovations skills to start his music and digital business.In the garage operation, Will increased his knowledge and entrepreneurship culture to prompt the decision of starting the digital book enterprise that he invented. Will Burry was faced with many dilemmas of how to ascertain his technological application, which kind of clientele to serve, the way of distribution of the services to the people, the demand for books, as well as the pricing strategies.
Monopolistic competition markets structure
As per the two scenarios of Will Bury and Thomas Money Services, it is crystal clear that they are examples of monopolistic market structures. This form of a market is a blend of the monopoly and perfect competition and has been called monopolistic competition or competing monopolists as stated by (Hushke, 2010). In the real world, there is neither absolute monopoly that is an absence of competition, nor perfect competition, but monopolistic competition. The products are not complete substitutes for one another, but they are close substitutes.
With respect to monopolistic competition, the number of dealers (buyers and sellers) is not large, at any rate not as lar.
10 kelly mulgan muers creating public valueJordi Puig
This document discusses the concept of "public value" as a framework for assessing the goals and performance of public policy. It argues that public value provides a broader measure than traditional approaches, taking into account outcomes, means of delivery, trust, legitimacy, equity, and accountability. The document outlines three dimensions of public value - services, outcomes, and trust/legitimacy - and examines how well current public management addresses each dimension. It concludes by suggesting tools and techniques need to be adapted to make public value a practical concept for policymaking.
This paper reports results from a laboratory experiment exploring the relationship between reputation and entry in procurement. There is widespread concern among regulators that favoring suppliers with good past performance, a standard practice in private procurement, may hinder entry by new (smaller or foreign) firms in public procurement markets. Our results suggest that while some reputational mechanisms indeed reduce the frequency of entry, so that the concern is warranted, appropriately designed reputation mechanisms actually stimulate entry. Since quality increases but not prices, our data also suggest that the introduction of reputation may generate large welfare gains from the buyer.
Competition a potent tool for economic development and Socio - Economic welfareEkta Grover
This document discusses competition as both an economic development tool and a potential source of socio-economic disruption. It notes that competition can accelerate GDP growth and job creation while also increasing consumer choice and surplus. However, it also argues that cut-throat competition can encourage unfair practices, reduce long-term investment in innovation, and disproportionately benefit competitive sectors over uncompetitive ones. The document uses the examples of agriculture, aviation, manufacturing and real estate to illustrate how competition must be "workable" and balanced to promote inclusive growth across all sectors of the economy. It poses that competition policy should aim for economic, allocative and dynamic efficiency through fostering cooperation, information sharing and supporting transitional sectors.
eGovernment measurement for policy makersePractice.eu
Author: Jeremy Millard.
The eGovernment policy focus has moved over the last five years from being mainly concerned with efficiency to being concerned both with efficiency and effectiveness. This paper examines the current and future development of eGovernment policy making, and the critical role that measurement and impact analysis has in it.
Externalities, Public Goods, Imperfect Information, and Social ChoiceNoel Buensuceso
This document discusses several concepts related to market failures including externalities, public goods, imperfect information, and social choice. It provides the following key points:
1. Externalities occur when costs or benefits from an economic activity impact third parties outside the activity. This can lead to an inefficient allocation of resources if not accounted for.
2. Public goods are nonrival and nonexcludable, making them difficult for private markets to provide due to free-rider problems. Government typically provides public goods.
3. Imperfect information in markets can cause problems like adverse selection and moral hazard that prevent efficient exchanges. Both market and government solutions exist.
4. Social choice theory examines how to aggregate
Bortoletti, corruption, some interesting topics, commissione europea, ipa zag...Maurizio Bortoletti
It does not seem strange, well, that's about to keep talking for a long time, sometimes with great emphasis to emphasize the decisive importance for the future of the country, but has failed to any concrete results: quite simply, it's about warning because the recruitment and promotion of the most capable introduce an intolerable element of unpredictability in the system and it is an attack on the right of co-optation. Well, that system - recalling Paolo Mancini in "In Praise of the subdivision" - which is like a twin sister, but much more palatable, the proverbial "sora camilla" nobody wants, but if everyone seize, still in the dark and silence, with the exception that denounce the subdivision of others, looking good from admitting that if they purloin some even their place of power but would not have been parcelling exercise of pluralism.
Bortoletti, corruption, some interesting topics, commissione europea, ipa zag...Maurizio Bortoletti
This document contains summaries of three articles about corruption from academic journals. The first article discusses corruption in public procurement, specifically capture and extortion of public officials in choosing limited versus open bidding procedures. The second addresses how corruption patterns change with infrastructure privatization, potentially moving from taxpayers to consumers. The third examines the relationship between decentralization of government and corruption, noting mixed theoretical impacts and the need to consider how decentralization is implemented.
Realising Social Value within Facilities ManagementSunil Shah
The document discusses realizing social value within facilities management. It finds that while FM providers perform well on CSR, creating social value as defined by the Social Value Act is more challenging. It identifies three main themes of social value creation - employment, education, and upskilling. Employment opportunities are the most common activity but measurement and evaluation of social value impact remains an issue. Clear requirements and metrics are needed to effectively incorporate social value goals within FM contracts and service delivery.
The document discusses procurement reform and modernization efforts. It defines key concepts like procurement reform, modernization, and capacity development. Procurement reform often has a political dimension and aims to improve frameworks, integrity, and use of technology. Modernization refers to continuous improvements based on other countries' experiences. Capacity development builds the abilities of individuals, organizations, and societies to effectively manage their own affairs. The document outlines principles of procurement reform like professionalism, use of e-procurement, and performance management to increase value for money and service delivery.
This presentation by Joshua D. WRIGHT, University Professor of Law, Antonin Scalia Law School, George Mason University (GMU) and Executive Director, Global Antitrust Institute, Antonin Scalia Law School, GMU, was made during the discussion “Competition Under fire” held at the 18th meeting of the OECD Global Forum on Competition on 5 December 2019. More papers and presentations on the topic can be found at oe.cd/cunf.
Talous & Yhteiskunta -lehden numero 4/2019 sisältää artikkeleita ja haastattelun, jotka kertovat alueellista keskittymistä käsitelleistä tutkimuksista. Suomen seitsemän suurimman kaupunkiseudun väestö kasvaa nopeimmin, kun taas pienempien kaupunkien ja maaseudun väestöosuus supistuu. Muutos on kuitenkin verrattain hidasta, ja sille on myös vastavoimia.
Talous & Yhteiskunta -lehden numeron 3/2019 teemana on työ ja terveys. Artikkeleissa tarkastellaan Suomen terveydenhuoltojärjestelmän toimivuutta ja pohditaan mitä voitaisiin oppia Ruotsissa jo tehdyistä terveydenhuollon uudistuksista. Muissa artikkeleissa käsitellään terveyskäyttäytymisen ja työmarkkinamenestyksen yhteyttä, työttömien aktivointia, työikäisten eritasoisia terveyspalveluja, työaikajoustojen vaikutusta terveyteen sekä informaatioteknologian ja tekoälyn käyttöä mielenterveyspalvelujen tukena. Haastateltavana on THL:n tutkimusprofessori Unto Häkkinen. Hänen mielestään sote-uudistus on tehtävä, vaikka se vaatiikin vielä monen yksityiskohdan ratkaisemista.
Opiskelijavalinta ylioppilaskirjoitusten nykyarvosanojen perusteella ei ole täysin perusteltua, todetaan Aalto-ylipiston ja Palkansaajien tutkimuslaitoksen uudessa tutkimuksessa. Ylioppilaskirjoitusten arvosanoilla on pitkän ajan vaikutuksia. Hienojakoisempi arvosteluasteikko tekisi opiskelijavalinnasta nykyistä reilumman.
Esimerkkiperhelaskelmissa tarkastellaan seitsemää kotitaloutta. Laskelmat kuvaavat ansiotulojen, tulonsiirtojen sekä verojen ja veronluonteisten maksujen kehityksen vaikutusta perheiden ostovoimaan. Perheille lasketaan Tilastokeskuksen tietoihin perustuvat perhekohtaiset kulutuskorit, jotka mahdollistavat perhekohtaisten inflaatiovauhtien ja reaalitulokehitysten arvioinnin. Ensi vuonna eläkeläispariskunnan ostovoima kasvaa eniten ja työttömien vähiten. Esimerkkiperhelaskelmia on tehty Palkansaajien tutkimuslaitoksella vuodesta 2009 lähtien.
Palkansaajien tutkimuslaitos ennustaa Suomen talouskasvuksi tänä vuonna 1,3 prosenttia ja ensi vuonna 1,1 prosenttia. Kasvua hidastaa eniten yksityisen kulutuksen kasvun hidastuminen. Toisaalta vienti kasvaa tänä vuonna hieman ennakoitua nopeammin, neljä prosenttia, ja ensi vuonnakin vielä kaksi prosenttia. Tuotannollisten investointien kasvu jatkuu maltillisena, mutta rakentamisen vähentyminen kääntää yksityiset investoinnit kokonaisuutena pieneen laskuun ensi vuonna. Hallituksen vuoteen 2023 mennessä tavoittelemien 75 prosentin työllisyysasteen ja julkisen talouden tasapainon toteutumista on vaikea arvioida, koska nämä tavoitteet on määritelty rakenteellisina ja niiden eri arviointimenetelmät saattavat tuottaa hyvin erilaisia tuloksia.
Suomen palkkataso oli 2015 ylempää eurooppalaista keskitasoa. Suomen suhteellinen asema ei ole juurikaan muuttunut 2010-luvun alun tilanteesta. Hintatason huomioiminen kuitenkin heikentää asemaamme palkkavertailussa. Palkkaerot meillä olivat vertailumaiden pienimpiä ja pysyivät melko samalla tasolla koko tarkastelujakson 2007–2015 ajan. EU-maissa havaittiin erisuuntaista kehitystä palkkaeroissa. Suurin osa palkkojen kokonaisvaihteluista selittyi taustaryhmien sisäisillä palkkaeroilla.
Suomessa toteutettiin vuonna 2005 laaja eläkeuudistus, jossa vanhuuseläkkeen alaikärajaa laskettiin. Tutkimuksessa havaitaan, että ikärajan lasku aikaisti eläkkeelle jäämistä. Kun alaraja laskettiin 65:stä 63:een, myös yleinen eläköitymisikä laski. Taloudellisten kannustimien muutosten vaikutukset eläköitymiseen jäivät paljon heikommiksi alaikärajan muuttamiseen verrattuna. Eläköitymisikään voidaan siis vaikuttaa tehokkaasti ja vähäisin kustannuksin lakisääteistä eläkeikää muuttamalla.
Talous & Yhteiskunta -lehden numeron 2/2019 artikkelit ja haastattelu kertovat tutkimuksista, joita on tehty Suomen Akatemian strategisen tutkimuksen neuvoston hankkeessa "Osaavat työntekijät - menestyvät työmarkkinat". Keskeinen kysymys on, miten sopeudutaan teknologisen kehityksen mukanaan tuomaan työn murrokseen.
Tutkimuksessa tarkastellaan ammattirakenteiden polarisaatiota sekä sitä, että mihin supistuvissa ja rutiininomaisissa ammateissa olevat työntekijät päätyvät hyödyntämällä kokonaisaineistoa vuosille 1970-2014. Ammattirakenteiden polarisaatio on jatkunut Suomessa jo vuosikymmeniä. Ammattirakennemuutoksen kehityskulku on pääosin tapahtunut siten, että keskitason tuotanto- ja toimistotyöntekijät ovat nousseet urapolkuja pitkin asiantuntijatöihin. Viimeaikaista palveluammattien osuutta on puolestaan kasvattanut se, että nuoret siirtyvät työmarkkinoille palvelutöihin. Rutiininomaisia ja kognitiivisia taitoja vaativien ammattien työntekijöillä on kuitenkin suurempi todennäköisyys nousta korkeammille palkkaluokille rutiininomaista ja fyysistä työtä tekeviin työntekijöihin verrattuna. Rutiininomaista ja fyysistä työtä tekevät tippuvat puolestaan suuremmalla todennäköisyydellä matalapalkka-aloille, ja heidän ansiotason kehitys on myös heikompaa.
Palkansaajien tutkimuslaitos on alentanut Suomen talouskasvun ennustettaan kuluvalle vuodelle viimesyksyisestä 2,3 prosentista 1,4 prosenttiin. Kansainvälisen talouden näkymien epävarmuus hidastaa Suomen talouskasvua etenkin kuluvana vuonna. Jos pahimmat uhkakuvat jäävät toteutumatta, kasvu piristyy ensi vuonna hivenen 1,5 prosenttiin. Viime vuonna pysähtynyt viennin kasvu elpyy, ja myös yksityisen kulutuksen kasvu tukee talouskasvua. Suomi on sopeutunut ammattirakenteiden murrokseen yleisesti ottaen hyvin, mutta etenkin perusasteen koulutuksen varassa olevien varttuneiden työntekijöiden työllistämiseen voi olla vaikea löytää työkaluja.
The Labour Institute for Economic Research has lowered its forecast of Finland’s economic growth for the current year from last autumn’s 2.4 per cent to 1.4 per cent. Uncertainty in the international economic outlook will slow Finland’s economic growth, particularly this year. If the worst threats do not materialise, growth will pick up slightly next year to 1.5 per cent. Export growth, which came to a halt last year, will recover and growth in private consumption growth will also provide support to economic growth. In general, Finland has adjusted well to occupational restructuring, but it may be difficult to find means to employ older workers who only have basic education.
Palkansaajien tutkimuslaitos on alentanut Suomen talouskasvun ennustettaan kuluvalle vuodelle vii-mesyksyisestä 2,3 prosentista 1,4 prosenttiin. Kansainvälisen talouden näkymien epävarmuus hidastaa Suomen talouskasvua etenkin kuluvana vuonna. Jos pahimmat uhkakuvat jäävät toteutumatta, kasvu piristyy ensi vuonna hivenen 1,5 prosenttiin. Viime vuonna pysähtynyt viennin kasvu elpyy, ja myös yksityisen kulutuksen kasvu tukee talouskasvua. Suomi on sopeutunut ammattirakenteiden murrokseen yleisesti ottaen hyvin, mutta etenkin perusasteen koulutuksen varassa olevien varttuneiden työntekijöiden työllistämiseen voi olla vaikea löytää työkaluja.
Tämä PT Policy Brief tuo esiin havaintoja Suomen tuloerojen kehityksestä 1990-luvun puolivälin jälkeen. Tällä ajanjaksolla tuloerot ovat kasvaneet. Aluksi kasvu oli hyvin nopeaa, kunnes kehitys tasaantui finanssikriisin myötä. Tämä näkyy tarkasteltaessa kehitystä viiden vuoden ajalta lasketuissa keskituloissa. Taloudessa on tuloliikkuvuutta, ts. tulot vaihtelevat vuodesta toiseen. Havaitsemme, että liikkuvuus tuloportaikossa on vähentynyt. Samalla kun tuloerot ovat kääntyneet kasvuun, on tuloverotuksen progressiivisuus alentunut. Valtion tuloveron alennusten ohella tähän on erityisesti tulojakauman huipulla vaikuttanut pääomatulojen voimakas kasvu.
Julkisen budjetin sopeuttamistoimia toteutetaan usein etuuksien indeksileikkauksina tai tuloverojen korotuksina. Näillä toimenpiteillä on tulonjako- ja työllisyysvaikutuksia. Tämä PT Policy Brief esittää SISU-mallilla lasketut vaikutukset käytettävissä oleviin tuloihin tuloluokittain, jos valtion tuloveroasteikkoa korotettaisiin 0,4 prosenttiyksiköllä tai jos kansaneläkeindeksiä leikattaisiin. Molemmissa toimenpiteissä budjetti vahvistuisi 180 miljoonalla eurolla mutta tulonjakovaikutukset ovat huomattavan erilaiset. Oheisen kuvion mukaisesti indeksileikkaukset kohdistuvat voimakkaasti alempiin tulonsaajakymmenyksiin, kun taas tuloveron korotukset kohdistuvat ylempiin kymmenyksiin. Kun huomioidaan muutosten aiheuttamat työllisyysvaikutukset, kokonaiskuva muuttuu vain hieman.
Makeisvero otettiin käyttöön makeisille ja jäätelölle vuoden 2011 alusta. Virallinen perustelu oli kerätä verotuloja, mutta poliittisessa keskustelussa selvä tavoite oli ohjata kulutusta terveellisempään suuntaan. Makeisvero nosti selvästi makeisten kuluttajahintoja, mutta se ei vaikuttanut makeisten kysyntään. Toisaalta vuonna 2014 virvoitusjuomavero nousi sokerillisille juomille, mutta sokerittomat juomat jäivät alemmalle verotasolle. Tämä muutos alensi sokerillisten juomien kulutusta ja ohjasi kulutusta sokerittomiin juomiin. Onnistunut terveellisiin tuotteisiin ohjailu näyttääkin vaativan riittävän läheisen terveellisempien tuotteiden ryhmän olemassaolon.
Talous & Yhteiskunta-lehden "Suuren vaalinumeron" 1/2019 jutut käsittelevät aiheita, jotka voivat nousta esille kevään vaalikeskusteluissa. Pääpaino on ilmastonmuutoksessa: haastateltavana on Maailman ilmatieteen järjestön pääsihteeri Petteri Taalas, ja kahdessa eri artikkelissa pohditaan metsien hiilinielujen ja yhdyskuntarakenteen merkitystä pyrittäessä hillitsemään ilmaston lämpenemistä. Muut artikkelit käsittelevät tuloerojen kasvua, sotea, eläkkeiden riittävyyttä, maahanmuuttajien työllistymistä, EMUn uudistamista, eurooppalaista palkkavertailua ja kestävyysvajeen sopimattomuutta talouspolitiikan suunnitteluun.
Raportissa tehdään laskelmia korkeakouluopiskelijoille suunnatun opintotuen tulorajojen muutosten vaikutuksista. Opintotuen tulorajojen tavoite on, että suurituloisille opiskelijoille ei makseta opintotukea. Samalla nykyiset tulorajat kuitenkin estävät opiskelijoita tienaamasta niin paljon kuin he haluaisivat. Laskelmissa hyödynnetään simulaatiomallia, jonka avulla voidaan arvioida miten opiskelijoiden tulojakauma muuttuisi eri vaihtoehtoisissa opintotuen tulorajojen muutoksissa. Tulosten mukaan nykyisiä tulorajaoja voisi nostaa esimerkiksi 50 prosentilla, jolloin yhdeksän kuukauden ajan opintotukea nostavan opiskelijan vuosituloraja olisi 18 000 euroa nykyisen noin 12 000 euron sijaan. Laskelmien mukaan tällöin päästäisiin opintotuen nykyisten tulorajojen haitallisista tulovaikutuksista laajasti ottaen eroon, koska vain harva opiskelija tienaisi tätä tulorajaa enempää. Ottaen huomioon verotulot ja tulonsiirrot tämä vaihtoehto lisäisi julkisyhteisöjen nettotuloja arviolta 5,9 miljoonaa euroa vuodessa.
Tässä tutkimuksessa tutkitaan diskreettien valintajoukkojen vaikutusta palkansaajien työn tarjonnan reagoimiseen tuloveroihin. Artikkelin empiirisessä osiossa hyödynnetään opintotuen tulorajojen aiheuttamaa tuloveroissa tapahtuvaa äkillistä nousua, ja reformia, jossa tulorajoja nostettiin. Tulosten mukaan vuoden 2008 reformi, jossa tulorajaa nostettiin 9 opintotukikuukautta nostaneille 9000 eurosta 12000 euroon, aiheutti merkittäviä muutoksia opiskelijoiden tulojakaumassa. Tulojakauma siirtyi korkeammalle tasolle lähtien noin 2000 euron tuloista. Koska opiskelijoiden verojärjestelmässä ei tapahtunut muutoksia näin alhaisella tasolla vuoden 2008 reformissa, eivät työn taloustieteen normaalit mallit pysty selittämään tätä siirtymää. Artikkelissa esitetään empiirisiä lisätuloksia, teoreettisia argumentteja ja simulaatiomalli, jotka kaikki viittaavat siihen, että tuloksen pystyy selittämään diskreettien valintajoukkojen mallilla. Lisäksi artikkelissa esitetään, että verotuksen hyvinvointitappiot voivat olla suuremmat kuin empiirisesti estimoidut, jos valintajoukot ovat diskreettejä, mutta niiden ajatellaan olevan jatkuvia.
Talous & Yhteiskunta -lehden uuteen numeroon sisältyy artikkeleita veropohjasta ja -vajeesta, liikenteen veroista, naisista tulojakauman huipulla, työllisyyden kasvusta, mikrosimulaatiomalleista ja digitalisaatiosta. Lehdessä on myös Helsingin yliopiston professori Uskali Mäen haastattelu, jossa käsitellään tieteenfilosofista näkökulmaa taloustieteeseen.
Tutkimuksessa rakennettiin uusia makrotaloudellisia malleja PT:n ennustetyötä varten. Malleilla tehtiin ennusteita vuosille 2017 ja 2018. Mallien BKT-ennuste vuodelle 2017 on 3,1 prosenttia (vrt. toteutunut 2,8 prosenttia) ja vuodelle 2018 1,8 prosenttia (vrt. PT:n 11.9 ennuste 2,7 prosenttia).
Contributi dei parlamentari del PD - Contributi L. 3/2019Partito democratico
DI SEGUITO SONO PUBBLICATI, AI SENSI DELL'ART. 11 DELLA LEGGE N. 3/2019, GLI IMPORTI RICEVUTI DALL'ENTRATA IN VIGORE DELLA SUDDETTA NORMA (31/01/2019) E FINO AL MESE SOLARE ANTECEDENTE QUELLO DELLA PUBBLICAZIONE SUL PRESENTE SITO
Bharat Mata - History of Indian culture.pdfBharat Mata
Bharat Mata Channel is an initiative towards keeping the culture of this country alive. Our effort is to spread the knowledge of Indian history, culture, religion and Vedas to the masses.
Indira awas yojana housing scheme renamed as PMAYnarinav14
Indira Awas Yojana (IAY) played a significant role in addressing rural housing needs in India. It emerged as a comprehensive program for affordable housing solutions in rural areas, predating the government’s broader focus on mass housing initiatives.
Jennifer Schaus and Associates hosts a complimentary webinar series on The FAR in 2024. Join the webinars on Wednesdays and Fridays at noon, eastern.
Recordings are on YouTube and the company website.
https://www.youtube.com/@jenniferschaus/videos
Combined Illegal, Unregulated and Unreported (IUU) Vessel List.Christina Parmionova
The best available, up-to-date information on all fishing and related vessels that appear on the illegal, unregulated, and unreported (IUU) fishing vessel lists published by Regional Fisheries Management Organisations (RFMOs) and related organisations. The aim of the site is to improve the effectiveness of the original IUU lists as a tool for a wide variety of stakeholders to better understand and combat illegal fishing and broader fisheries crime.
To date, the following regional organisations maintain or share lists of vessels that have been found to carry out or support IUU fishing within their own or adjacent convention areas and/or species of competence:
Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR)
Commission for the Conservation of Southern Bluefin Tuna (CCSBT)
General Fisheries Commission for the Mediterranean (GFCM)
Inter-American Tropical Tuna Commission (IATTC)
International Commission for the Conservation of Atlantic Tunas (ICCAT)
Indian Ocean Tuna Commission (IOTC)
Northwest Atlantic Fisheries Organisation (NAFO)
North East Atlantic Fisheries Commission (NEAFC)
North Pacific Fisheries Commission (NPFC)
South East Atlantic Fisheries Organisation (SEAFO)
South Pacific Regional Fisheries Management Organisation (SPRFMO)
Southern Indian Ocean Fisheries Agreement (SIOFA)
Western and Central Pacific Fisheries Commission (WCPFC)
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Unlike the IUU lists published on individual RFMO websites, which may update vessel details infrequently or not at all, the Combined IUU Fishing Vessel List is kept up to date with the best available information regarding changes to vessel identity, flag state, ownership, location, and operations.
UN WOD 2024 will take us on a journey of discovery through the ocean's vastness, tapping into the wisdom and expertise of global policy-makers, scientists, managers, thought leaders, and artists to awaken new depths of understanding, compassion, collaboration and commitment for the ocean and all it sustains. The program will expand our perspectives and appreciation for our blue planet, build new foundations for our relationship to the ocean, and ignite a wave of action toward necessary change.
RFP for Reno's Community Assistance CenterThis Is Reno
Property appraisals completed in May for downtown Reno’s Community Assistance and Triage Centers (CAC) reveal that repairing the buildings to bring them back into service would cost an estimated $10.1 million—nearly four times the amount previously reported by city staff.
This report explores the significance of border towns and spaces for strengthening responses to young people on the move. In particular it explores the linkages of young people to local service centres with the aim of further developing service, protection, and support strategies for migrant children in border areas across the region. The report is based on a small-scale fieldwork study in the border towns of Chipata and Katete in Zambia conducted in July 2023. Border towns and spaces provide a rich source of information about issues related to the informal or irregular movement of young people across borders, including smuggling and trafficking. They can help build a picture of the nature and scope of the type of movement young migrants undertake and also the forms of protection available to them. Border towns and spaces also provide a lens through which we can better understand the vulnerabilities of young people on the move and, critically, the strategies they use to navigate challenges and access support.
The findings in this report highlight some of the key factors shaping the experiences and vulnerabilities of young people on the move – particularly their proximity to border spaces and how this affects the risks that they face. The report describes strategies that young people on the move employ to remain below the radar of visibility to state and non-state actors due to fear of arrest, detention, and deportation while also trying to keep themselves safe and access support in border towns. These strategies of (in)visibility provide a way to protect themselves yet at the same time also heighten some of the risks young people face as their vulnerabilities are not always recognised by those who could offer support.
In this report we show that the realities and challenges of life and migration in this region and in Zambia need to be better understood for support to be strengthened and tuned to meet the specific needs of young people on the move. This includes understanding the role of state and non-state stakeholders, the impact of laws and policies and, critically, the experiences of the young people themselves. We provide recommendations for immediate action, recommendations for programming to support young people on the move in the two towns that would reduce risk for young people in this area, and recommendations for longer term policy advocacy.
How To Cultivate Community Affinity Throughout The Generosity JourneyAggregage
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2. PALKANSAAJIEN TUTKIMUSLAITOS •TYÖPAPEREITA
LABOUR INSTITUTE FOR ECONOMIC RESEARCH • DISCUSSION PAPERS
*Labour Institute for Economic Research
Pitkänsillanranta 3 A, FIN-00530 Helsinki, Finland
eero.lehto@labour.fi
Helsinki 2006
216
THE CHOICE
BETWEEN THE IN-
HOUSE PROVISION
AND THE
COMPETITIVE OUT-
HOUSE PROVISION
OF PUBLIC
SERVICES
Eero Lehto*
4. The choice between the in-house provision and the competitive
out-house provision of public services
by
Eero Lehto
Labour Institute for Economic Reserach
10.1.2006
Adress:
Pitkansillanranta 3 A, 00530 Helsinki,
Finland
eero.lehto@labour.¯
Abstract
This study focuses on the production welfare services which are purchased by the gov-
ernment. We consider whether the delivery of the service should be public or private.
The social impact of the service is determined by the satisfaction of unforeseen individual
needs. Assuming that the information about these needs is ex post observed only by
the producer of the service favours public production. Auctioning the right-to-produce
contract, however, selects the most cost-e±cient private supplier. Whether private pro-
duction is optimal resolves from the trade-o® between cost e±ciency and a failure in
meeting individual needs. We also analyse investments in monitoring.
1
5. Keyword: Private or public, Right-to-produce auction, Service production
JEL Classi¯cations: L33, L80
2
6. 1 Introduction
The public provision of not only public but also private goods is extensive in many devel-
oped countries. This especially concerns educational, health and social services. It seems
that public provision easily leads to public production. But the extent to which public
units actually produce the services which they provide varies a lot from one country to
another. In the Nordic countries of Europe the public sector itself produces services to a
much larger extent than in other OECD countries. It is also remarkable that public em-
ployment is concentrated in the production of private services rather than private goods,
and more or less in that service segment in which the skill and educational requirements
are above the average.
This study considers the fairly common mechanism in which the public provider
arranges a competitive tender for the production of a large aggregate of publicly ¯nanced
services. The service in the situation under consideration is de¯ned to mean the responsi-
bility of taking care of the needs of many people in a certain area and in a speci¯c ¯eld. A
service considered is then running foreign or security policy, running a hospital, running a
school or running a home for the elderly. In our set-up we are able to analyse also whether
the public provision of such private goods as educational, health or social services should
be - or tends to be - in-house or private.
The literature on the public unit's role as a producer is rather scarce. The main strand
of the literature considers the trade-o® between market failure and governmental failure.
Market failure is seen to arise as a consequence of informational incompleteness. As Hart
(1995) emphasizes the di±culties in observing veri¯ably the variables which a®ect the ¯nal
3
7. outcome, the unforeseen nature contingencies and the relation-speci¯c investments which
easily lead to a hold-up problem generate losses for the provider of the service (see Hart
1995). Hart et al. (1997) consider the choice between in-house provision and outsourcing
of a publicly provided service. In their model governmental failure appears as insu±cient
incentives to advance productivity.
Analysing the choice of a public provider either to produce itself or to outsource
through competition, this study also stresses the central role of informational incomplete-
ness. We, however, see both governmental and market failure somewhat di®erently from
the previous research. We do consider that governmental failure accrues from a public
entity's minimal incentives to exert e®ort as in Schmidt (1996), Hart et al. (1997) and
Hart (2002). This study, instead, considers the lack of competition as being the main
disadvantage of in-house provision. Modelling market failure, we see that it is rather the
unobserved or unveri¯ably observed e®ectiveness of the service than unveri¯able invest-
ments in cost saving and service quality which is the source of informational imperfection.
E®ectiveness is de¯ned to describe the impact of a unit increase of an output on the
maximized welfare. E®ectiveness is then contingent not only on the quality but also on
the eligibility of the actions to meet individual needs.
We stress that to produce this provision requires on-line information of customers'
needs - which arise randomly and in an unforeseen way - and satisfaction of which de-
termines e®ectiveness. For example, a measure to cure a patient can be of high quality
but its impact on welfare can still be impaired by the fact that the measure concerned
is not the most appropriate. The high variance of parametrized e®ectiveness is typical of
the very services considered as distinction of many technical services and commodities.
4
8. It is also fairly normal that the producer must respond to arisen needs immediately, and
so we assume that the contract between the provider and the producer must be signed
before actual e®ectiveness materialises. Stressing the unforeseeable nature of the individ-
ual needs - whose satisfaction de¯nes the social impact of the service - is recognised in
the literature (see, for example, Sandmo, 2002) but its implications are not profoundly
analysed.
In the basic model we also assume that information about the value of e®ectiveness
is the producer's private information. It is then asymmetric information and not moral
hazard (as in Hart et al., 1997) which, in the outsourcing, leads to contractual failure
and restricts the provider's welfare. We think that both private and public producers
have an equal opportunity and ability to observe the needs which arise, react to them and
evaluate how a response to them a®ects social welfare. On the other hand, neither a public
nor a private ¯rm - which are run by a manager - is assumed to have any incentive to
deviate from the owner's will. From this it follows that the privately owned ¯rm tends to
minimise the level of output (or quality) and deviate from the e®ectiveness norm, whereas
a public ¯rm is benevolent and pursues social welfare. To encounter the unresponsiveness
related to the e®ectiveness parameter the public purchaser can only tend to control ex
ante outputs in private production and, in this way, ¯ght against the tendency towards
underproduction (allocative losses).
The producers' marginal costs - which de¯ne a producer's cost e±ciency - di®er from
each other and information about marginal costs is private. When the public provider
outsources production, a private producer is selected by auctioning the right-to-produce
5
9. contract.1
It then becomes evident that a private producer is more cost-e±cient than an
alternative public supplier, in particular, in a thick market with many potential produc-
ers. This result applies because the cost e±ciency of a public producer is drawn randomly
from the same distribution as the cost e±ciency of each private producer who participates
in the auction. According to this, in-house provision without an auction excludes the
opportunity to pick the most cost e®ecient producer through an auction or some other
competitive mechanism. For the government the most e®ective model to produce then
resolves from the derived trade-o® between allocative e±ciency - which describes the suc-
cess in satisfying arisen needs - and cost e±ciency. Focusing on this trade-o®, we analyse
a situation in which a public auctioneer announces a reserve price for the producer's mar-
ginal costs above which the bids are rejected and the public purchaser itself produces the
service. We then consider the factors which have impact on the expected scope of out-
house or in-house provision. It is not surprising that the probability of private production
increases with the number of producers and, respectively, decreases with the variance of
the parameter which de¯nes the e®ectiveness of individual outputs.
We extend our framework by allowing the public provider to invest in monitoring
by which the public provider may become able to observe the e®ectiveness parameter
in the out-house provision. Mutual observation of e®ectiveness leads to bargaining over
the spilt of the additional bene¯t which accrues when output is adjusted according to
the e®ectiveness parameter. The approach introduced to assess the public purchaser's
1
Owing to incomplete information about e®ectiveness, the auction mechanism cannot induce the pri-
vate producer to choose a socially e±cient production level as in Sappington and Stiglitz (1987).
6
10. incentives to invest in monitoring2
is fairly new in the literature. We show that the public
purchaser pursues social e±ciency by investing in monitoring if his/her ex-post bargaining
power is high enough. Rather few studies have considered the regulator's incentives to
monitor the service quality and the implications of the monitoring institution on the
outsourcing decision. SÄorensen (2004) allows the regulator to invest in monitoring and
shows in his pure moral hazard framework that an increase in monitoring can induce the
worker to strive harder for service quality.
Our approach put an emphasis on competition and more or less abstracts from the
hold-up problem which is central in the previous literature which focuses on public versus
private provision. These studies consider a model in which production is divided into two
phases: ¯rst, an investment in a ¯xed asset and, after that, the asset is used to provide the
service.3
The hold-up problem plays a central role owing to the sunk investments in the
relation-speci¯c asset, which is then later used in the delivery of the service. In Hart et al.
(1997) and Hart (2002) the investments in a ¯xed asset, which are seen to improve quality
and also reduce costs, precede the e®orts to reduce costs at the expense of the service
quality. In any case, these two types of actions raise a trade-o® between cost savings
and quality improvements. This dualism in the e®ort setting also characterises SÄorensen's
(2004) framework, in which the agent can promote either his/her private interests or,
2
Previously, Williamson (1964), Mirrlees (1975) and Calvo and Wellisz (1978) have recognised that
the public supervisors must be given su±cient incentives to exert supervisory e®ort.
3
In this framework it is not only the issue between public ownership and provision versus private
ownership and provision (as in Schmidt (1996) and in Hart et al. (1997)) but one can also consider
whether the government should own the asset and purchase the service from a private provider or whether
the ownership should also be allocated to the private ¯rm (as in Bentz et al., 2003).
7
11. alternatively, exert e®ort which improves the quality of the service. Insofar as the outcomes
are unveri¯able, the split of bene¯ts can only be based on incomplete contracting. In the
model by Hart et al. (1997) the extent to which the government (the purchaser) "holds
up" the producer in the bargain over the mutually observed surplus is contingent on the
ownership of the non-human assets. Private ownership also creates stronger incentives
to exert e®ort to save costs and deteriorate quality. At best, the quality deterioration
associated with private production remains minor. In Schmidt's (1996) adverse selection
framework, private ownership makes it possible for the governmental purchaser to commit
to hard budget constraints. In its strivings toward costs savings, the private ¯rm then
outperforms the public ¯rm which faces a soft budget constraint. But performance in
private ownership is impaired by the allocative ine±ciency owing to private information
about cost parameters.
In our study we take for granted the fact that the service under consideration is publicly
¯nanced and do not address the issue as to whether the provision of the service should
be public or private. The role of the public provision of private goods is increasingly
explored in the literature. One explanation for the public sector's active role in the
provision considers public provision as a device to alleviate the self-selection constraint
which restricts redistribution that can be accomplished by an optimal non-linear income
tax (see Cremer and Gahvari (1997) and Blomquist and Christiansen (1999)). Another
explanation which analyses voting models sees public provision as a means to capture
extra bene¯ts at the expense of others (see Epple and Romano, 1998). Some studies in
the optimal tax literature have also focused on public production and have regarded the
redistributive role of public employment as the main motivation for public production.
8
12. Through its intervention in production and the labour market the government can favour
skilled people and, in this way, encourage people to invest in education (Wilson, 1982) or,
it can favour the low-skilled and, in this way, reduce wage di®erentials, which for its part
allowes to alleviate the redistributive burden of income tax (PirttilÄa and Tuomala, 2002).
The rest of this study is organised as follows: In Chapter 2 we introduce the model.
In Chapter 3 we consider the results and compare the bene¯ts of public production and
private production from the public purchaser's viewpoint. In Chapter 4 we extend the
analysis to cover monitoring investments. Finally in Chapter 5 we present conclusions.
2 The model
In the model considered the purchaser of the service is always public. But the producer
can be either a public body or a private ¯rm. In the real world, the contract - which
de¯nes the provision of welfare services - covers a wide range of di®erent outputs and
needs which should be satis¯ed. However, without the loss of generality, we consider the
provision of a single output. The value of a service for the provider is assumed to be ¯S(q)
so that S0 > 0, S00 < 0 and q is the individual output. The e®ectiveness parameter ¯
denotes the value of q for the public purchaser. We assume that ¯ is uniformly distributed
in the range [¯; ¯]. G(¯) is ¯0s distribution function and G0(¯) is its density function.
The value of ¯ resolves when the need concerning q arises.
The production costs are µkq and so linear in q. µk is then a producer k0s marginal
cost. The potential private producers are ex ante symmetric. Nature selects each produc-
er's type randomly from a common distribution F(µk), which has a support [µ; µ]. The
marginal costs µk is a producer k0
s private information. The number of potential private
9
13. producers is n. A parameter µg denotes a public body's e±ciency parameter, which is also
drawn randomly from F(µk).
In the basic model, the e®ectiveness parameter ¯ is observed only by a producer, and
so in private production it is observed only by the winning supplier after the auction.
Delegating the production to the private ¯rm, the public authority loses its ability to see
the needs which arise randomly, and so the public purchaser does not observe ¯ when
it materialises under private production. While it carries out the production itself, the
public body observes ¯ and can react to it. The output q, instead, is veri¯ably observed.
In private production the public purchaser sells the right-to-produce contract in a
sealed, high-bid auction, which is analysed more closely in Dasgupta and Spulber (1989/90)
and in Chen (2004). In the right-to-produce auction the auctioneer speci¯es the quantity-
payment schedule P(q), which de¯nes how much the purchaser pays for an output q.
Knowing P(¢), the suppliers each name a quantity in a sealed bid. The suppliers make
bids noncooperatively and we will also show that their bidding follows a common equilib-
rium strategy q(µk) so that xk = µk when xk is the marginal cost insisted upon on which
¯rm k0
s bidding is based. Then a supplier whose marginal cost is µk bids q(µk) and for
a bidder it is not worth deviating from q(µk) when this strategy is adopted by the other
bidders. We also allow the purchaser to discourage ine±cient bidders to enter the auction.
According to this, the purchaser cuts the quantity-payment schedule so that P (q(xk)) = 0
if q(xk) < q(µo
) when q(xk) is the type k0
s bid. The reserve price µo
implicitly de¯nes
the reservation level for µk, above which it does not pay for the purchaser to induce the
private producer to make bids.
In an extended version of the model we allow the public purchaser to become able to
10
14. monitor unveri¯able ¯ after investing in monitoring capacity. We then assume that with
a given probability p(h) the purchaser is able to observe ¯ when h denotes the monitoring
e®ort which is veri¯ably observed. Then p(0) = 0 and p0(h) > 0; p00(h) < 0 when
h > 0. If in private production the public purchaser also observes unveri¯able ¯ after the
producer is selected, q can be adjusted to correspond to actual ¯ and not only to E(¯)
as in the absence of monitoring. This creates an additional bene¯t and the parties will
bargain about how to split this gain. Contractual agreements about the readjustment
of q according to mutually observed ¯ are ruled out, because ¯ is not veri¯able. The
purchaser is assumed to obtain a share ¸, (0 · ¸ · 1) of the additional gain. The level
of ¸ resembles the purchaser's ex post bargaining power.
We also make two additional assumptions.
Assumption 1. q¤¤
, which is de¯ned by the condition ¯S0
(q) ¡ µ = 0, is positive.
This assumption guarantees that the interior solution for q and the purchaser's payo®
are positive in public production and that the system-wide payo® is also positive in all
cases. We also introduce another assumption.
Assumption 2. q¤
de¯ned by E(¯)S0
(q) ¡ (2µk ¡ µ) = 0 is positive when µk < µ and
non-negative when µk = µ.
Assumption 2 guarantees that in the private production (in the basic model) all the
suppliers make positive bids insofar as q(xk) > q(µo
).
Assumption 3. xk + F(xk)
F0(xk)
increases in xk.
Assumption 3 guarantees that the auction considered is regular (see Myerson (1981)
and Chen (2004)).
11
15. 3 Results from the basic model
In this chapter we discuss the implications of the right-to-produce auction. The order
of events is the following: Nature selects µk (k = 1; :::; n) and µg. The purchaser then
de¯nes the quantity-payment schedule P(q) and sets the reserve price µo
, after which the
purchaser arranges a sealed high-bid auction in which the right to produce is sold to the
¯rm which bids the maximum quantity insofar as q(µk) > q(µo
). Next, the winning ¯rm
or the public provider itself produces the service during which the e®ectiveness parameter
¯ materialises. In the case in which the auction selects a private producer, he is paid
according to P (q), if the quantity target speci¯ed is met. Otherwise, the producer is
punished. We next consider in-house provision (i.e. pure public production) more closely
and after that we evaluate the implications of contracting out through an auction.
3.1 Public production
In public production the production phase succeeds the resolution of µg and the output
decision is adjusted according to an observed ¯. The purchaser's expected payo® with
respect to random ¯ in public production, E¯(WG(µg)), has an expression
R¯
¯ [¯S(q) ¡
µgq]G0
(¯)d¯. Optimal q, denoted q¤¤
, is obtained from arg maxq WG. The assumptions
of the model guarantee that the ¯rst-order conditions
¯S0
(q) ¡ µg = 0 (1)
de¯ne q¤¤. E¯( dWG) - which denotes the purchaser's expected payo® in the maximum in
public production - then has the equation
E¯( dWG(µg)) =
Z ¯
¯
(¯S(q¤¤
) ¡ µgq¤¤
)G0
(¯)d¯: (2)
12
17. condition that the auction implements the optimal strategy q¤
(xk) (de¯ned in (11)) is
also valid because the model considered meets the so-called Mirrlees-Spence property or
single-crossing property (see Guesnerie and La®ont (1984) and La®ont and Martimort
(2002)), according to which
@¦k
qP
@µk
= ¡1 preserves its sign.4
The winning supplier's willingness to pay for the right to produce is not a function of
parameter ¯, and so no such e±ciency-improving mechanism exists which would imple-
ment the symmetric-information allocation in which output is set on the basis of the true
value of the e®ectiveness parameter. We can say that ¯rm k is unresponsive with respect
to ¯5. This excludes an opportunity to renegotiate the contract in private production
after the real value of the e®ectiveness parameter is exposed to the producer.
De¯ne ¦k(µk) = ¦k(µk; µk). Setting ¦k(µo) = 0, one then obtains from condition (5)
for the producer's pro¯ts
¦k
(µk) =
Z µo
µk
q(xk)(1 ¡ F(xk))n¡1
dxk: (7)
Equating the right-hand side of (7) to the right-hand side of ¦k
(µk; µk) in (4), one
obtains the expression
P(q(µk)) = µkq(µk) +
R µo
µk
q(xk)(1 ¡ F (xk))n¡1
dxk
(1 ¡ F(µk))n¡1
(8)
for a payment function for all µk 2 [µ; µo
]. The latter term on the right-hand side of
4
The boundary condition, being a part of su±cient conditions, is also valid in the situation considered
(see more closely Guenerie and La®ont (1984)).
5
Caillaud et al. (1988) refer by unresponsiveness to the situation, analysed by Guenerie and La®ont
(1984), in which the implementation of incentive-compatible allocation would con°ict with the principal's
interests. Implementability - when an agent possesses private information - is also considered more closely
in La®ont and Martimort (2002).
14
18. (8) re°ects the size of an informational rent which must be paid to deter each bidder from
mimicking less e±cient bidders and to induce each bidder to reveal their true marginal
cost in the auction.
The expected pro¯ts, Eµo
µ (¦k
(µk)), derived from (7) are then (see Chen, 2004)
Eµo
µ (¦k
(µk)) =
Z µo
µ
q(xk)(1 ¡ F (xk))n¡1
F (xk)dxk: (9)
The sum of the producers' expected pro¯ts is n times the expression (9). The purchaser's
expected pro¯ts from private production are obtained by subtracting nEµo
µ (¦k
(xk)) from
Eµo
µ (SWP1(xk) in (3). This di®erence can then be written as
Eµo
µ (WP(µk)) :=
Z µo
µ
[E(¯)S(q(xk)) ¡ (xk +
F (xk)
F0(xk)
)q(xk)]f(1)(xk)dxk: (10)
In (10) it has also been taken into account that the government chooses the optimal q
independently of actual ¯. Let q¤
(xk) ´ argmax WP(xk). The condition
E(¯)S0
(q) ¡ (xk +
F(xk)
F0(xk)
) = 0: (11)
then de¯nes q¤
(xk). The schedule q¤
(xk) then maximizes the purchaser's expected prof-
its (10), because the necessary second order condition (6) guarantees that q¤(xk) arises
as a Bayesian-Nash equilibrium in the auction considered. Consequently ¦k
(µk; xk) is
maximized at xk = µk.
After the winning supplier has been selected, however, an opportunity arises for both
the purchaser and the private supplier to gain some additional bene¯t by adjusting
the product plan from q¤
(xk) to the output level which maximizes system-wide pro¯ts
E(¯)(S(q) ¡ µkq. This shows that ex post e±ciency is at odds with the purchaser's ex
ante desires to maximize his own pro¯ts, which is commonly recognized as the lack of
15
19. renegotiation-proofness in adverse selection problems (see, for example, La®ont and Ti-
role (1993) and La®ont and Martimort (2002)). The expectation of renegotiation would,
however, destroy the suppliers' incentives to bid according to the initial contract. There-
fore the purchaser must be committed to abide by the original terms of the contract.
Alternatively, the contracted output could maximize system-wide pro¯ts. The supply
contract
E(¯)(S0
(q) ¡ µk = 0 (12)
would be renegotiation-proof. The adaption of (12) would lead to renegotiation-proof
product volume, but would be unpro¯table to the purchaser, because the payment P(q)
and so informational rents paid to the winning supplier would become excessively large.
The condition (11) also shows that q¤
(xk) decreases in xk and, on the ground of
Assumption 2, q¤
(xk) > 0 (xk 2 [µ; µo
]. The supplier k will thus always ¯nd it worthwhile
to participate when xk · µo
. Also taking into account the fact that with probability
(1 ¡ F(µo
))n
no producer bids, as a consequence of which the public provider is itself
the producer, we obtain for the purchaser's overall expected payo® in the maximum the
expression
Eµo
µ (V 1(µk; n)) := (1 ¡ F (µo
))n
E¯( dWG(µg)) + Eµo
µ ( dWP(µk); (13)
where E¯( dWG(µg)) is from (2) and Eµo
µ ( dWP(µk) denotes the expression (10) in which
q(xk) = q¤
(xk):
16
20. 3.3 Comparison
We next explore how ¯0
s randomness and the number of bidders a®ect µo0
s value and
the comparative advantages of private and public production. It is also interesting to see
whether the public provider sets µg > µo
, which would raise the requirement for the private
producer's minimum cost e±ciency above the public producer's own cost e±ciency. It is
also evident that public production brings for the public purchaser a larger outcome than
private production if µg = µk (= the winning private supplier's e±ciency).
Proposition 1 Given ¯ + ¯ = A, and increase in the spread ¯ ¡ ¯ decreases dWP(µo) in
(13) in relation to E¯( dWG(µg)). This makes the public provider set µo
below µg even if
¯ = ¯, and an increase in ¯ ¡ ¯ forces µo
further down in relation to µg.
Proof. The proof is divided into 2 parts.
Part A) Di®erentiating (13) with respect to µo
;the Eµo
µ (V 1(xk; n)) is maximized for
some value of µo, satisfying the condition
E¯( dWG(µg)) ¡ dWP(µo
) = 0: (14)
We ¯rst show that an increase in ¯ ¡ ¯, given ¯ + ¯, increases E¯( dWG(µg)) but leaves
dWP(µo
) unchanged. Let us write the integral
R ¯
¯ in the form
R ¯
A¡¯
and consider the
changes in E¯( dWG(µg)). We obtain @ dWG(µg)
@¯
= S(q¤¤) > 0, @2dWG(µg)
@¯2 = ¡(S0
(q¤¤
))2
¯S00(q¤¤)
>
0 which shows that dWG(µg) is increasing and strictly convex in ¯. Owing to this,
1
2
( dWG(µg)
¯
¯
¯
¯=¯
+ dWG(µg)
¯
¯
¯
¯=¯
) > E¯( dWG(µg)) = 1
¯¡¯
R ¯
¯
dWG(µg))d¯; and so
@E¯(dWG(µg))
@¯
=
1
¯¡¯
( dWG(µg)
¯
¯
¯
¯=¯
+ dWG(µg)
¯
¯
¯
¯=¯
) ¡ 2
(¯¡¯)2
R ¯
¯
dWG(µg)d¯ > 0, given ¯ + ¯ = A. This
17
21. shows that an increase in ¯ ¡ ¯ increases E¯( dWG(µg)). On the other hand, @dWP(µo
)
@¯
=
@Eµ(dWP(µo))
@¯
= 0: The widening of ¯ ¡¯ thus increases E¯( dWG(µg)) in relation to dWP (µo
).
Part B). A closer look at dWP(µo) = E(¯)S(q¤(µo)) ¡ (µo + F(µo
)
F0(µo)
)q¤(µo) reveals that
dWP(µo
) = E¯( dWG(µo
)) ¡
F(µo
)
F 0(µo)
q¤
(µo
) (15)
when ¯ = ¯. From equation (15) it follows that dWP(µo
) < E¯( dWG(µo
)) already when
¯ = ¯. This result and the fact that by Assumption 3 dWP(µo
) decreases in µo
implies
that µo < µg when ¯ = ¯. On the other hand, the ¯nding in Part A) showed that the
di®erence E¯( dWG(µg)) ¡ dWP(µo
) only increases in the spread ¯ ¡ ¯. From this it follows
that the validity of (14) requires that µo must decrease when ¯ ¡ ¯ increases. .
The above ¯nding, according to which it pays to set µo
< µg even if ¯ = ¯, is similar
to the previous result of Riley and Samuelson (1981), who showed that the reserve price,
being the lowest price at which an item will be sold, is well above the auctioner's own
valuation. This result emerged because the informational rent in the form F(µo
)
F0(µo)
lifts the
virtual cost paid to the winning supplier above this producer's actual cost µk, and so the
value of µo where the public provider's marginal bene¯ts of outsourcing the production
to type k equal the marginal bene¯ts of producing itself at the e±ciency µg is below µg.
The auction mechanism thus requires that the private producer is more cost e±cient than
the public body itself even in the absence of uncertainty related to ¯. The increase of the
variation of unveri¯able ¯ only forces µo
lower in relation to µg.
It is noteworthy that, according to (14), the optimal µo
is also independent of the
number of bidders as in Riley and Samuelson (1981). This does not, however, mean that
the expected outcome as concerns the decision to provide in-house or out-house would be
18
22. independent of the number of bidders.
Proposition 2 In the optimum in which (14) is satis¯ed, Eµo
µ (V 1(µk; n)) increases in n.
Proof. We show that Eµo
µ (V 1(µk; n + 1)) ¡ Eµo
µ (V 1(µk; n)) > 0: This inequality can be
written as
[(1¡F (µo
))n+1
¡(1¡F(µo
))n
]E¯( dWG(µg))+
Z µo
µ
[fn+1
(1) (xk)¡fn
(1)(xk)] dWP(xk)dxk > 0; (16)
where fn
(1)(xk) = nF (xk)(1 ¡ F(xk))n¡1:
It can be shown that
Z µo
µ
[fn+1
(1) (xk) ¡ fn
(1)(xk)] dWP(xk)dxk >
Z µo
µ
[fn+1
(1) (xk) ¡ fn
(1)(xk)] dWP (µo
)dxk; (17)
because dWP (xk) and fn+1
(1) (xk)¡fn
(1)(xk) decrease in xk,
R µo
µ [fn+1
(1) (xk)¡fn
(1)(xk)]dxk > 0 and
dWP(xk) is non-negative by Assumption 2. Noticing that
R µo
µ [fn+1
(1) (xk)¡fn
(1)(xk)] dWP (µo)dxk =
[(1¡F(µo
))n+1
¡(1¡F(µo
))n
] dWP(µo
) and taking into account (17) and the result (14), we
can show that the left-hand side of (16) is above F(µo
)(1¡F(µo
))n
[ dWP(µo
)¡E¯( dWG(µg)]
which is zero. According to this, Eµo
µ (V 1(µk; n + 1)) ¡ Eµo
µ (V 1(µk; n)) > 0:
The purchaser's pay-o® in out-house provision increases in n for two reasons. First, the
expected cost e±ciency of the winning producer increases in n and, secondly, competition
becomes more intense when n increases, as a consequence of which information rents paid
to the out-house provider decrease. This implies that an increase in n also increases the
probability of outsourcing. Indeed, given µo
, the the probability that minfµ1; :::; µng is
below µo is
R µo
µ [fn
(1)(xk)dxk = 1 ¡ (1 ¡ F(µo))n, which proves that an increase in n also
increases the probability that the winning bid will be accepted.
19
23. 4 Monitoring in private provision
4.1 Monitoring investments and auctioning the opportunity to bargain
We now focus on the situation in which the purchaser invests in monitoring. The moni-
toring investment h is taken after the auction, but before the e®ectiveness parameter ¯
materialises. The right-to-produce and the opportunity to bargain over the additional
bene¯t are auctioned simultaneously.
Bargaining will occur only after the winning supplier is selected. But an opportunity
to obtain additional bene¯t through bargaining will, in any case, re°ect in those terms
on which the right-to-produce is auctioned. The investment in h is relation-speci¯c and
sunk at the moment of the actual bargain. From this it follows that the investment
costs associated with h are solely carried by the purchaser alone and that the right to
bargain is to be sold in conjunction with the regular right-to-produce auction. An option
to adjust the pre-speci¯ed output target via bargaining is sold in an auction at the ¯xed
price, denoted by c(µk), because it is not possible to ¯x the target level for q before
¯ materialises. The auctioned values of both c(xk) and the quantity-payment schedule
P (q(xk)) depend on the output schedule q(xk) and on the planned h(xk). Because the
ex ante e±cient q(xk) and h(xk) depart from the respective ex post e±cient levels, the
purchaser must be committed to also implementing both the ex ante e±cient q(xk) and
the ex ante e±cient h(xk) to guarantee the success of the auction. The winner in this
kind of extended auction is again the producer whose cost parameter µk is the lowest.
In the extended model, which includes monitoring investments, the order of events
is the following: Nature selects µk (k = 1; :::; n) and µg. After this a purchaser de¯nes
20
24. the quantity-payment schedule P(q(xk)), the schedule h(xk) for monitoring investments
and ¯xed remuneration c(xk) and arranges a sealed high-bid auction in which the right
to produce is sold to the ¯rm k which bids the highest q(xk) if q(xk) > q(µo). After
the auction the purchaser then invests an amount h(xk) in monitoring apparatus. If
this investment corresponds to the contracted amount, the private producer will pay the
purchaser the amount c(xk) for the right to bargain about the possible additional bene¯ts.
After this the production phase starts and the e®ectiveness parameter ¯ materialises.
Either the winning ¯rm or the public provider is the producer. In the case in which the
auction has selected a private producer, he/she is paid the amount P(q(xk)), if the quantity
target speci¯ed for q(xk) is met. Otherwise, the producer is punished. If the purchaser
also succeeds in observing ¯, the parties will adjust the output at the optimal level and
the winning ¯rm will obtain its share of an additional gain in addition to P(q(xk)).
That part of the system's expected payo® which accrues from the right-to-produce con-
tract (in the absence of bargaining) is still given in (3) and denoted by Eµo
µ (SWP 1(µk)).
Let qb denote the output which is adjusted according to materialized ¯. After the auction
and after the value of ¯ has been resolved, the system-wide payo® in the private produc-
tion, SWP2(µk) := ¯S(qb) ¡ µkqb, is mutually maximized with respect to qb, which yields
the condition
¯S0
(qb) ¡ µk = 0 (18)
for qo
b (µk) := arg maxqb
SWP2(µk).
Assumption 4. q(µk) de¯ned by (18), being also a function of ¯, is convex in ¯:
This assumption is valid, if S000
(q)S0
(q)¡(S00
(q))2
¸ 0: It is then valid for many typical
21
25. functional forms of S(q): Assumption 4 guarantees that the second order conditions for
incentive compatibility are in force.
Because ¯ is not veri¯able, the exact value of qo
b (µk) - which is a function of ¯ and
thus materializes after ¯ resolves - cannot be contracted upon and made contingent on ¯.
The expected value of SWP 2(µk) before the auction, and so also before ¯ materializes, is
then
Eµo
µ;¯(SWP2(µk)) =
Z µo
µ
Z ¯
¯
[¯S(qo
b(xk)) ¡ xkqo
b (xk)]G0
(¯)f(1)(xk)d¯dxk:
The parties - the purchaser and the private producer - will bargain over the split of an
additional bene¯t SWP2(µk)) ¡ SWP1(µk)) with probability p(h) when SWP1(µk)) is
de¯ned in (3). The purchaser obtains a share ¸, (0 · ¸ · 1) of this bene¯t. Making
bids on the supply contract, potential private suppliers are also aware of the future level
of h(xk). The expected overall system-wide pro¯ts from private production before the
auction, denoted by Eµo
µ;¯(SWP3(µk); have the equation
Eµo
µ (SWP3(µk)) = (1 ¡ p(h(xk)))Eµo
µ (SWP 1(µk)) + p(h(xk))Eµo
µ;¯(SWP2(µk)) ¡ h(xk):
(19)
Let us then analyse more closely the implications of an auction in which the right-to-
produce and the opportunity to bargain over the additional bene¯t are auctioned simul-
taneously.
The supplier k0
s total payo® ¦k
b (µk; xk) is then
¦k
b (µk; xk) = fP (q(xk)) ¡ µkq(xk) + p(h(xk))[(1 ¡ ¸)(E¯(SWP2(µk; xk)) ¡ SWP1(µk; xk))]
¡c(xk)g(1 ¡ F(xk))n¡1
(20)
where E¯(SWP2(µk; xk)) =
R ¯
¯ [¯S(qo
b (xk))¡µkqo
b (xk)]G0
(¯)d¯ and SWP 1(µk;xk) = E(¯)S(q(xk))¡
22
26. µkq(xk). The supplier's income in (20) consists of three parts. The ¯rst is P (q(xk)) ¡
µkq(xk), the income from the right-to-produce contract. The second is p(h))(1¡¸)(E¯(SWP2(µk; xk))¡
SWP1(µk; xk)), the share of the additional income which accrues, if output is adjusted
according to actual ¯. The winning supplier must also pay c(xk) for the right to bargain
despite the success in monitoring ¯.
The auction induces supplying ¯rms to reveal their type and maximise ¦k
b (µk; xk) with
respect to xk so that
@¦k
b
(µk;xk)
@xk
= 0. Applying the envelope theorem, we obtain from (20)
@¦k
b (µk; xk)
@µk
¯
¯
¯
¯
¯
xk=µk
= ¡[q(xk) + p(h(xk))(1 ¡ ¸)(E¯(qb(xk)) ¡ q(xk))](1 ¡ F(xk))n¡1
; (21)
where E¯(qb(xk)) :=
R¯
¯ qo
b(xk)G0(¯)d¯. The second-order condition for the incentive com-
patibility is given in the Appendix. Because
@¦k
qP
@µk
= ¡[1 ¡ p(h(xk))(1 ¡ ¸)] preserves its
sign, the su±cient condition for implementation is also valid.
De¯ne ¦k
b (µk) = ¦k
b(µk; µk). Setting ¦k
b (µo
) = 0, one obtains from (21)
¦k
b(µk) =
Z µo
µk
[q(xk) + p(h(xk))(1 ¡ ¸)(E(qb(xk)) ¡ q(xk))](1 ¡ F (xk))n¡1
dxk: (22)
The supplier k0
s expected pro¯ts derived from (22) are
Eµo
µ (¦k
b(µk)) =
Z µo
µ
[q(xk) + p(h(xk))(1 ¡ ¸)(E(qb(xk)) ¡ q(xk))](1 ¡ F (xk))n¡1
F(xk)dxk:
(23)
The sum of all n producer's expected pro¯ts is nEµo
µ (¦k
b (µk)).
The purchaser's expected pro¯ts, denoted, Eµo
µ (V 2(µk), are then
Eµo
µ (V 2(µk; n) = (1 ¡ F (µo
))n
E¯( dWG(µg)) +
Z µo
µ
WP U(xk)f(1)(xk)dxk; (24)
where
R µo
µ WPU(xk)f(1)(xk)dxk := Eµo
µ;¯(SWP3(µk))¡nEµo
µ (¦k
b (µk)) when Eµo
µ;¯(SWP 3(µk))
23
27. is de¯ned in (19) and Eµo
µ (¦k
b (µk)) in (23). WPU(xk) in (24) then has the equation
WP U(xk) = (1 ¡ p(h(xk)))[E(¯)S(q(xk) ¡ xkq(xk)] (25)
+p(h(xk))[
Z ¯
¯
[¯S(qo
b (xk)) ¡ xkqo
b(xk)]G0
(¯)d¯
¡[(1 ¡ p(h(xk))(1 ¡ ¸))q(xk) + p(h)(1 ¡ ¸)(E(qo
b(xk))]
F(xk)
F0(xk)
¡ h(xk)
The assumptions of the model, for the present, guarantee that Eµo
µ (V 2(µk; n) is concave
in q(xk) given h, and, respectively, that it is concave in h(xk) given q(xk). However, next
we assume that Eµo
µ (V 2(µk; n) is also jointly concave in q(xk) and h(xk).
Assumption 5. Eµo
µ (V 2(µk; n) in (24) is jointly concave in q(xk) and h(xk).
By Assumption 5, we can focus on the ¯rst-order conditions while considering the
optimal conduct in terms of q(xk) and h(xk).
Di®erentiating WPU(xk) from (25) with respect to q(xk) and h(xk) we obtain the
¯rst-order condition
E(¯)S0
(q(xk)) ¡ xk ¡
F(xk)
F0(xk)
(
1 ¡ p(h(xk))(1 ¡ ¸)
(1 ¡ p(h(xk)))
) = 0; (26)
which de¯nes q+(xk) ´ argmaxq Eµo
µ (V 2(µk; n) and the condition
p0
(h(xk))f
Z ¯
¯
[¯S(qo
b (xk)) ¡ xkqo
b (xk)]G0
(¯)d¯ ¡ [E(¯)S(q+
(x)k) ¡ xkq+
(xk)](27)
¡(1 ¡ ¸)
F(xk)
F0(xk)
(
Z ¯
¯
qo
b(xk)G0
(¯)d¯ ¡ q+
(xk))g ¡ 1
= 0;
which de¯nes h(xk)+
´ arg maxh Eµo
µ (V 2(µk; n).
After the winning supplier has been chosen, it is tempting for the winning supplier and
the purchaser to abstract from incentive compatibility and readjust P(q(xk)) and h(xk).
24
28. The supply contract q+
(xk); h+
(xk) is thus not renegotiation-proof and the purchaser's
commitment to stick to the initial payment schedules and monitoring investments are
required to deter renegotiations. We next consider solutions (26) and (27) and assume
that the purchaser has enough commitment capacity to keep to the initial contract.
4.2 Output decision
We will show that the opportunity to get some extra bene¯t through monitoring invest-
ments increases, in any case, the output. From (26) we obtain the following result:
Proposition 3 When h > 0 and ¸ > 0 an opportunity to obtain an extra bene¯t through
bargaining increases output, given xk, even if ¯ is ex post not mutually observed.
Proof. Comparing q+
(xk), de¯ned by (26) with q¤
(xk) de¯ned by (11), proves that
q+
(xk) > q¤
(xk), because 1 ¡ ¸ + ¸
(1¡p(h)) > 1 in (26) and S0
(q(xk)) decreases in q(xk).
The result obtained describes the fact that already a positive probability to achieve
some extra bene¯t thorough bargaining raises the marginal bene¯ts of production and
therefore also the level of production. The opportunity to monitor ¯ then corrects the
downward bias of q(xk) which is created by the pre-¯xing of q(xk) and concavity of
S(q(xk)).
If ¯ is actually observed, E¯(qo
b (xk)) will arise above q+
(xk).
Proposition 4 When h > 0 and ¸ > 0 and when the monitoring leads to the exposure of
¯, the expected output level rises above q+
(xk), given xk.
Proof. The proof is given in two stages.
25
29. First stage: compare the condition (26) with the condition
E(¯)S0
(q(xk)) ¡ xk = 0; (28)
which de¯nes qa
(xk). From this one sees directly that q+
(xk) is below qa
(xk).
Second stage: Let qa
(E(¯)) denote qa
(xk), given xk and E(¯) and qo
b (¯) denote
qo
b (xk), given xk and ¯. We obtain from (28) and (18) the equation E(¯)S0
(qa
(E(¯))) =
¯S0
(qo
b (¯)). From this equation it follows that
E(¯)S0
(qa
(E(¯))) =
Z ¯
¯
¯S0
(qo
b (¯))G0
(¯)d¯: (29)
On the other hand, from (18) is also obtained the following:
E(¯)S0
(qo
b (E(¯))) =
Z ¯
¯
¯S0
(qo
b (¯))G0
(¯)d¯: (30)
By Assumption 4,
Z ¯
¯
¯qo
b (¯))G0
(¯)d¯ ¸ qo
b(E(¯)):
Using the above inequality and equation (30) we obtain
E(¯)S0
(E¯(qo
b (¯))) ·
Z ¯
¯
¯S0
(qo
b (¯))G0
(¯)d¯:
This inequality together with (29) implies that
E(¯)S0
(E¯(qo
b (¯))) · E(¯)S0
(qa
(E(¯)))
from which it follows that
E¯(qo
b(¯)) ¸ qa
(E(¯)):
Because qa
(xk) > q+
(xk), then also E¯(qo
b (xk)) > q+
(xk).
26
30. The probable success in monitoring removes the allocative ine±ciency associated with
the inability to respond to actual ¯, which raises the output in the quantity payment
schedule. Owing to some additional informational rents which increase marginal costs by
(1 ¡ ¸)
F(xk)
F0(xk )(E¯(qo
b(xk)) ¡ q+
(xk)) in (27), q+
(xk) still remains below E¯(qo
b (xk)).
4.3 Monitoring decision
The assumptions of the model do not guarantee that the inner-point solution of the
condition (27) de¯nes a maximum. If the marginal bene¯ts of monitoring investment,
which accrue when q is adjusted according to the mutually observed ¯, are small in
relation to the respective marginal costs whose size is ¡1, the left-hand side of (27) can
be negative with all µk < µo
. The investments in monitoring would then be zero. Next we
consider a situation in which it pays to invest in monitoring.
Proposition 5 . The monitoring investments shift µo
closer to µ if h+
(µo
) > 0.
Proof. Maximizing Eµo
µ (V 2(xk; n) in (24) with respect to µo
, gives the ¯rst-order condi-
tion
E¯( dWG(µg)) ¡ WPU(µo
) = 0 (31)
for µo
. In this condition E¯( dWG(µg)) is independent of µo
and by Asumption 3 WP U(µo
)
decreases in µo. On the other hand, when h+(µo) > 0, WPU(µo) in (24) increases in h(µo)
when 0 < h(µo
) < h+
(µo
). From this it follows that an increase in h(µo
), while h(µo
) is
still below h+(µo), must be balanced by increasing µo to make (31) valid .
The monitoring opportunity then easily enlarges the scope for private provision. In
the situation in which h+(xk) > 0, it is also interesting to compare h+(xk) de¯ned by
27
31. (27) with a socially optimal h(xk), denoted by hs
(xk), which maximizes the social wel-
fare SWP3(µk) = (1 ¡ p(h(xk))[E(¯)S(q+
(xk)) ¡ µkq+
(xk)] + p(h(xk))
R¯
¯ [¯S(qo
b(xk)) ¡
µkqo
b (xk)]G0(¯) ¡ h(xk). The condition
p0
(h(xk))
Z ¯
¯
[¯S(qo
b (xk)) ¡ µkqo
b (xk)]G0
(¯)d¯ ¡ [E(¯)S(q+
(xk)) ¡ µkq+
(xk)] ¡ 1 = 0 (32)
then de¯nes hs
(xk) ´ argmaxh SWP3(µk). We obtain the following proposition concern-
ing the level of monitoring investments:
Proposition 6 Part A) When hs
(xk) > 0 and ¸ < 1, the purchaser sets h+
(xk) below
hs(xk). Part B) When h+(xk) > 0, the distortion in h+(xk) decreases in ¸:
Proof. Part A) Because
R ¯
¯ qo
b (xk)G0
(¯)d¯ ¡ q+
(xk) > 0 in (27) and because p0
(h(xk))
decreases in h(xk); h+(xk) de¯ned by (27) must be smaller than hs(xk).
Part B) It is straightforward that an (1 ¡ ¸) F(xk)
F0(xk)(
R ¯
¯ qo
b (xk)G0
(¯)d¯ ¡ q+
(xk)) in (27)
decreases in ¸ which makes h+(xk) become closer to hs(xk).
The result obtained shows that the purchaser's bargaining power can even promote
social welfare because the "hold-up" weakens the purchaser's (the government's) own
investments. The previous results (see, for example, Hart et al., 1997) focused on the
suppliers' incentives to invest in innovations. Then the purchaser's bargaining power
improves the social welfare insofar as the positive cost savings e®ect dominates the negative
quality deteriorating e®ect.
4.4 Solving P (q(µk)) and c(µk)
Expressions for P(q(µk)) and c(µk) in (20) can be solved in terms of q+
(µk) and qo
b(µk) by
¯rst replacing q(xk) by q+
(µk) and qb(xk) by qo
b(µk) in (20). Writing expression (20) then
28
32. in the form ¦k
b(µk; µk) and equating the right hand-side of the equation obtained with the
right-hand side of (22), one can solve for expressions for P(q+
(µk)) and c(µk). For the
quantity-payment schedule P(q+(µk)) one again obtains the equation (8). For the price
of the bargaining opportunity we obtain the equation
c(µk) = p(h(µk))[(1 ¡ ¸)(SWP2(µk) ¡ SWP1(µk)) (33)
¡
R µo
µk
(1 ¡ ¸)(E(qo
b (xk)) ¡ q+
(xk))(1 ¡ F (xk))n¡1
dxk
(1 ¡ F (µk))n¡1
]:
The above equation shows that by auctioning the bargaining opportunity, the purchaser
is able to obtain the expectation for the supplier's share of the ex post bargain minus the
informational rent, which is the second term on the right-hand side of (33).
5 Conclusions
This study has shown that the choice between private or public production leads to a
trade-o® between cost e±ciency - which improves when competition intensi¯es - and, on
the other hand, e®ectiveness - which is the measure of the extent to which the system
responds to unforeseen individual needs. According to the central assumption of this
analysis, only that unit which produces learns the individuals needs of customers. The
informational asymmetry which has arisen and which concerns e®ectiveness is typical
of the production of welfare services. In the outsourcing of such public goods as, for
example, administrative tasks, the informational incompleteness is di®erent. The public
provider may constantly be better informed about productional requirements than the
possible out-house producer. The same may concern private ¯rms in the situations in
which they outsource core tasks. In the latter situations the implications of outsourcing
29
33. may di®er from the results obtained in this study. But in all situations the unveri¯able
nature of e®ectiveness may cause similar contractual problems: it is very hard to induce
the out-house producer to allocate his activities in an e®ective way.
On the whole, by focusing on the unveri¯able and unforeseen nature of individual
needs which service production should satisfy, we introduce new insight into the topic
under consideration. Our study can also explain the recent development in some western
countries. The tendency toward contracting out, in the ¯eld of, for example, welfare
services, has been rather slow in those industrialised countries in which the state and
municipalities still produce a huge part of these services themselves. The tendency toward
private production is slowed down by the cautious attitude of political decision-makers
and authorities. Maybe the experiences of private production do not encourage them to
take big steps toward the privatisation of these services. On the other hand, in the ¯eld of
technical services - which used to be quite widely produced by the state and municipalities
- the pace toward private production has been rather fast.
References
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6 Appendix
The second-order condition related to (21) requires that the expression
¡(1 ¡ p(h)(1 ¡ ¸))
@(q+(xk)(1 ¡ F(xk))n¡1)
@xk
¡ p(h)(1 ¡ ¸)
@(E¯qo(xk)(1 ¡ F(xk))n¡1)
@xk
¡(1 ¡ ¸)(E¯(qo
b (xk)) ¡ q+
(xk))
@(p(h(xk)(1 ¡ F(xk))n¡1
)
@xk
:
for
@2¦k
b
@xk@µk
is non-negative. Clearly, q+
(xk) de¯ned by (26) , h(xk) de¯ned by (27) and
qo
(xk) de¯ned by (18) decrease in xk, and so (1 ¡ F(xk))n¡1
). This, and the fact that
E¯(qo
b (xk)) > q+
(xk) (see the proof fo proposition 4) guarantees that
@2¦k
b
@xk@µk
¸ 0.
33