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Production Costs, Transaction Costs, and Local Government Contractor Choice

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  • Ferris, James M
  • Graddy, Elizabeth
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    Abstract

    Local governments that choose to externally produce a service can contract with other governments, for-profit firms, or nonprofit organizations. This contractor choice is modeled as one in which the local government decisionmaker minimizes service delivery costs, both production and transaction costs, subject to political and fiscal constraints. The model is estimated using data on three frequently contracted health services obtained from a national survey of local government service delivery arrangements. The empirical analysis reveals the importance of both production and transaction costs, as well as the choice set of available suppliers, to contractor choice. Copyright 1991 by Oxford University Press.

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    Bibliographic Info

    Article provided by Western Economic Association International in its journal Economic Inquiry.

    Volume (Year): 29 (1991)
    Issue (Month): 3 (July)
    Pages: 541-54

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    Handle: RePEc:oup:ecinqu:v:29:y:1991:i:3:p:541-54

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    Cited by:
    1. Richard J. Kish & Amy F. Lipton, 2013. "Do Private Prisons Really offer Savings Compared with their Public Counterparts?," Economic Affairs, Wiley Blackwell, vol. 33(1), pages 93-107, 02.
    2. Germa Bel & Xavier Fageda, 2008. "Reforming the local public sector: economics and politics in privatization of water and solid waste," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 11(1), pages 45-65.
    3. Savitski, David W., 2003. "Ownership selection in the US electric utility industry," Utilities Policy, Elsevier, vol. 11(4), pages 203-223, December.

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