Association for Public Policy Analysis & Management

Privatization proponents have long argued that privatization, or contracting out, leads to greater efficiency and effectiveness in the delivery of government services. Others counter that the argument is ill-suited in the context of human services delivery, which is typically characterized by a lack of competitive markets, contract landscapes that are dominated by nonprofit organizations, and an imperative to place client outcomes over operational efficiencies. Despite such critiques, the lauded benefits of privatization have proven both politically attractive and administratively expedient, and as a result, the last several decades have witnessed a restructuring of human services across the globe. This paper uses the case of U.S. child welfare services to examine whether the reality of privatized service delivery lives up to its promise. Leveraging the variation in welfare system privatization that is exhibited across the U.S. states, we test whether increasing degrees of privatization result in greater service efficiency and effectiveness. We apply Coarsened Exact Matching to nation-wide administrative data from the Adoption and Foster Care Analysis and Reporting System to construct a series of matched groups comparing over 115,000 children and youth served by state child welfare systems with limited, large-scale, and system-wide privatization against peers served by state systems administered by public case workers. Analysis findings indicate that, contrary to the arguments of privatization proponents, operational efficiency is highest in government-administered systems - and decreases as the degree of service privatization grows. In contrast, more privatization is associated with effectiveness gains - but only to a point - as fully-privatized systems appear no more effective than their non-privatized counterparts. We discuss likely causes for the findings, and the implications for the privatization debate and the success of human services.