Journal of Political Economy Vol. 127 No. 1 2019

Private Outsourcing and Competition: Subsidized Food Distribution in Indonesia

Abhijit Banerjee¹; Rema Hanna²; Jordan Kyle³; Benjamin A. Olken¹; Sudarno Sumarto⁴

¹ Massachusetts Institute of Technology · ² Harvard University Press · ³ International Food Policy Research Institute · ⁴ Tim Nasional Percepatan Penanggulan Kemiskinan (TNP2K) and SMERU Research Institute

Abstract

We explore the impact of allowing for outsourcing service delivery to the private sector within Indonesia’s largest targeted transfer program. In a field experiment across 572 municipalities, we find that allowing for outsourcing the last mile of food delivery reduced operating costs without sacrificing quality. However, the prices citizens paid were lower only where we modified the bidding rules to encourage more bidders. Higher rents are associated with greater entry despite elites’ efforts to block reform. In this context, the option to outsource and sufficient competition generated significant benefits relative to public distribution.

DOI

10.1086/700734

Volume

127

Issue

1

Pages

101-137

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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