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That public services are being exposed to competition often means that private firms get the chance of supplying services that have previously only been offered by the public sector. Competition can also be introduced within the public sector.

In labour market policy, tests with private employment officers were introduced in 2007. In the educational area, the free choice of schools has lead to competition between independent schools and municipal schools and between different municipal schools. Within the social services, private agents have been allowed to give offers for different kinds of rehabilitation and activation efforts.

The effects of competition

An important question for research is how competition affects costs and quality. Theoretical models show that an increase in competition can lead to a larger supply that reduces the price and leads to there being no demand for low-quality services, but it is not certain that this is the case. The effects depend both on the circumstances before competition and how competition is implemented. Competition can also have indirect effects. For example, the wages in an entire sector can be affected even if only parts of the sector are exposed to competition. Empirical studies in the area are often based on reforms that have been implemented as a test, have been gradually implemented or have affected certain regions more than others. The results from such analyses do not point in any obvious direction.