All You Need is LOV? Quasi-market Governance and Coordination Costs in Swedish Municipal Social Care

Abstract

This paper examines the coordination costs of extending quasi-market governance across multiple public service domains simultaneously, drawing on temporal and regional variation in the voluntary adoption of Sweden’s Act on System of Choice (LOV) across 290 municipalities from 2009 onwards. A difference-in-differences design is applied across three domains: elderly home care, disability services, and social welfare. In elderly home care alone, LOV adoption produces no detectable deterioration in care quality or coverage. The main finding is that extending choice governance into social welfare — which shares assessment infrastructure and budgetary processes with elderly care — is associated with a significant fall in elderly home care coverage (−1.4 percentage points, 20 per cent of the pre-adoption mean) and municipal nursing coverage (−1.4 to −5.3 percentage points, 12 to 47 per cent of the pre-adoption mean). Public expenditure and staffing are uniformly null, consistent with non-contractible quality deterioration under incomplete contracts rather than fiscal or labour channels. Administrative overload, not competition, shapes outcomes.