Discrimination and Administrative Burden in Public Service Markets: Does a Public-Private Difference Exist?

Public services are often provided in markets where both public and private providers operate. Irrespective of ownership status, public services ought to be accessible regardless of clients' race, gender, ethnicity, or age. However, as theories of statistical discrimination and cream skimming suggest, market-based incentives may lead service providers to focus on nonminority clients because they perceive them as easier-to-serve and therefore less costly. This may lead to discrimination and hence jeopardizes equal access. In this study, we ask whether private, for-profit providers are more likely to discriminate on ethnic grounds compared to publicly owned providers. We implement a field experiment within the Flemish elderly care market by sending out email requests with either a Flemish or a Maghrebian name to all public and privately owned nursing homes. For overall response rates, no statistically significant differences between senders were found. However, we do find that privately owned facilities are about 20 percentage points less likely to provide information on how to enroll when the request is send from a Maghrebian name alias, and blinded coders perceive the information sent to the Maghrebian alias as less comprehensive. In publicly owned facilities, no such differences exist. We conclude that a public-private difference does exist, but that the mechanism of discrimination is subtler than expected. Rather than directly refusing to respond, nursing homes increase administrative burdens and learning costs for minority applicants.