Private Outsourcing and Competition: Subsidized Food Distribution in Indonesia

Policy Research

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.

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Author 
Abhijit Banerjee
Rema Hanna
Jordan Kyle
Benjamin A Olken
Sudarno Sumarto
Author(s)
Abhijit Banerjee
Rema Hanna
Jordan Kyle
Benjamin A Olken
Research Area 
National
Keywords 
private sector
transfer program
subsidized food
Publication Type 
Journal Article