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Social Impact Bonds in Nonprofit Health Care: New Product or New Package?

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  • Mark Pauly
  • Ashley Swanson

Abstract

This note considers a relatively new form of financing for social services, the "Social Impact Bond." Proponents of Social Impact Bonds argue that they present a solution to several problems in funding social services, including performance measurement and the distribution of risk. Using a simple model, we demonstrate that Social Impact Bonds have many features present in standard financing arrangements. They will lead to greater program success when investors' effort can positively influence outcomes, but are unlikely to do so otherwise. We conclude that the value of this funding innovation will be strongly context-dependent.

Suggested Citation

  • Mark Pauly & Ashley Swanson, 2013. "Social Impact Bonds in Nonprofit Health Care: New Product or New Package?," NBER Working Papers 18991, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:18991
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    References listed on IDEAS

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    1. Glaeser, Edward L. & Shleifer, Andrei, 2001. "Not-for-profit entrepreneurs," Journal of Public Economics, Elsevier, vol. 81(1), pages 99-115, July.
    2. Jonathan Conning & Jonathan Morduch, 2011. "Microfinance and Social Investment," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 407-434, December.
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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I1 - Health, Education, and Welfare - - Health
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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