Provider Ownership and Service Quality: Evidence from Swedish Residential Care Homes

Abstract

The provision of social services by private providers is widespread in OECD countries, but the jury is still out on whether marketization has improved service quality. This paper seeks to nuance existing debate by examining difference in service quality between different types of pri- vate providers. We argue that different forms of private ownership are associated with varying intensity of incentives for profit maximization, ultimately affecting the quality of service provi- sion. Using residential elder care homes in Sweden as our universe of cases, we leverage novel panel data capturing the ownership of the providers that operate nursing homes against a set of indicators pertaining to the facility-level service quality. The results suggest that providers with high-powered incentives to make profit, such as those owned by private equity firms and pub- licly traded companies, consistently deliver lower-quality care, compared with ordinary private companies and non-profit organizations.