Public Versus Private Providers: How Ownership Impacts Quality in Public Service Markets

Governments continue to liberalize public services through quasi-market measures that grant consumers a subsidized choice of public, nonprofit, or for-profit provider. The assumption is that competition and differences in ownership improve service quality. However, information asymmetry and measurement difficulties make especially complex human services prone to quality-shading, potentially lowering quality. To examine these conflicting perspectives, the article tests competing hypotheses on the relationship between ownership and service quality using administrative data and a nationwide survey among public, nonprofit, and for-profit providers of center-based childcare in Denmark. Based on a comprehensive set of 27 quality indicators, the findings show relatively few differences across ownership, although with a tendency toward for-profit providers offering higher quality than their public and nonprofit counterparts. The findings call for a continued focus among public managers and policymakers on stewarding quasi-markets to provide equal access to high-quality services.