Summary:

In 1993, a new law on child welfare legislated for private residential institutions, and there is now a market for children who are deprived or show disruptive behaviour. Private institutions, which now harbour 60% of all institutionalised children, specialise on the misbehaved young, while public institutions provide care for the deprived children. This sharing of the «market» is paradoxical, since the formal competence level of the staff is higher in the public institutions, and transaction costs for the misbehaved youngsters in the market setting are high. The private institutions offer individualised treatment and are able to extract more money from the government than the public institutions can. One reason is that they calculate a price for each youth on the basis of costs, while the public institutions operate within a budget. The strong market position of the private institutions is not necessarily due to their efficiency. The private institutions are favoured by the restrictions enforced on the public institutions, which in turn are compelled by the Ministry to provide a safe haven for deprived youngsters. «Difficult» youths, then, represent a «disturbance», and are left to the private institutions, which offer to take care of them at a price. This favourable position, with limited competition, allowing them to specialise and develop their competence is a consequence of how the authorities have organised the field.