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.
Banerjee, Abhijit, Rema Hanna, Jordan Kyle, Benjamin A. Olken, and Sudarno Sumarto. "Private Outsourcing and Competition: Subsidized Food Distribution in Indonesia." Journal of Political Economy 127.1 (February 2019): 101-137.