The Asia Health Policy Program is part of the Walter H. Shorenstein Asia-Pacific Research Center
Economics Letters
March 14, 2008
Modeling the government make-or-buy decision, Hart and colleagues [Hart, O., Shleifer, S. and Vishny, R.W., 1997, "The proper scope of government: Theory and an application to prisons", Quarterly Journal of Economics 112, 1127–1161] assume government providers are exogenously more replaceable than private providers. Instead, we posit government managers' soft incentives arise endogenously from their lack of control rights, because of rationally softer budget constraints.