This article presents the results of a systematic review of international studies on economic and quality effects of contracting out published in the period from 2000 to 2014. We conducted a comprehensive search of the literature and identified 49 relevant studies. There are three main findings of the systematic review: (1) cost savings documented in international contracting out literature have been decreasing over time; (2) cost savings have been much greater in technical services than in social services; and (3) economic effects have been twice as large in Anglo‐Saxon countries compared with other countries. With regard to measuring the effect of contracting out on service quality, which is a vital component of any service delivery arrangement, very few studies assess this issue in a comprehensive manner. There is also a significant lack of studies that include measures of transaction costs, thereby making it difficult to evaluate the impact of contracting out on overall cost‐effectiveness of public service delivery. We conclude that generalization of effects from contracting out should be made with caution and are likely to depend, among other things, on the transaction costs characteristics of the service, the market situation and the institutional/regulatory setting.