Quasi-market competition in public service provision: user sorting and cream-skimming

Thorbjørn Sejr Guul*, Ulrik Hvidman, Hans Henrik Sievertsen

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

Abstract

Quasi-markets that introduce choice and competition between public service providers are intended to improve quality and efficiency. This paper demonstrates that quasi-market competition may also affect the distribution of users. First, we develop a simple theoretical framework that distinguishes between user sorting and cream-skimming as mechanisms through which quasi-markets may lead to high-ability users becoming more concentrated among one group of providers and low-ability users among a different group. Second, we empirically examine the impact of a nationwide quasi-market policy that introduced choice and activity-based budgeting into Danish public high schools. We exploit variation in the degree of competition that schools were exposed to, based on the concentration of providers within a geographical area. Using a differences-indifferences design—and register data containing the full population of students over a nine-year period (N=207,394)—we show that the composition of students became more concentrated in terms of intake grade point average after the reform in high-competition areas relative to low-competition areas. These responses in high-competition regions appear to be driven both by changes in user sorting on the demand side and by cream-skimming behavior among public providers on the supply side.
Original languageEnglish
Article numbermuab002
Pages (from-to)740-755
Number of pages16
JournalJournal of Public Administration Research and Theory
Volume31
Issue number4
Early online date13 Feb 2021
DOIs
Publication statusPublished - 27 Mar 2021

Bibliographical note

Publisher Copyright:
© 2021 The Author(s) 2021. Published by Oxford University Press on behalf of the Public Management Research Association. All rights reserved.

Structured keywords

  • ECON Applied Economics
  • ECON CEPS Education

Keywords

  • ECON CEPS Education
  • ECON Applied Economics

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