I develop a model of public sector contracting based on the multitask framework by Holmström and Milgrom (1991). In this model, an agent can put effort into increasing the quality of a service or reducing costs. Being residual claimants, private owners have stronger incentives to cut costs than...

In many countries, employment services are contracted out to private providers. However, there is little evidence on the contract design as well as on the effects of differential pricing on private provider performance. This paper contributes to the literature by presenting detailed information...