Non-profit,for-profit and government organisations in social service provision: comparison of behavioural patterns for Austria

This paper investigates behavioural differences between non-profit organisations (NPOs), government organisations (GOs), and private market organisations (PMOs) as suppliers of nursery schools and retirement homes. On the basis of Weisbrod's undersupply model, the differentiated demand approach, and the public finance argument on the redistributive role of government, three hypotheses are theoretically specified and empirically tested: client differentiation; product differentiation; and price differentiation. NPOs and PMOs are shown to provide qualitatively better services and charge significantly higher prices than GOs. A clustering of clients with similar socio-economic backgrounds can be observed: GOs provide services for clients with lower economic and social status than private suppliers. GOs, holding more than two-thirds of the respective markets, are responsible for a basic provision of services; they pursue distributional goals by producing services themselves; only rarely a contracting out to private suppliers can be noted.Christoph Badelt and Peter Weiss are both in the Department of Economics, Vienna University of Economics and Business Administration, Vienna, Austria.Financial support from the Research Foundation of the Austrian National Bank (Jubiläumsfondsprojekt no. 2814) is gratefully acknowledged. The authors wish to thank Helmut Anheier, Henry Hansmann and Burton Weisbrod for valuable comments on an earlier draft, which was presented to the International Conference on Voluntarism, Non-government Organisations and Public Policy, Jerusalem, May 1989. The usual caveat applies.