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Employment, privatization, and managerial choice: Does contracting out reduce public sector employment?

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  • Sergio Fernandez

    (Indiana University)

  • Craig R. Smith

    (University of Georgia School of Public & International Affairs)

  • Jeffrey B. Wenger

    (University of Georgia School of Public & International Affairs)

Abstract

We examine the effects of governments' use of alternative service provision on public employment using panel data from a nationally representative sample of local governments. We model the effects of alternative service provision on the size of the public workforce and hypothesize that alternative provision jointly impacts both full- and part-time employment. We find evidence of an inter-relationship between these employment types. Our results from seemingly unrelated and 3SLS regressions indicate that full-time employment in the public sector declines when additional services are provided by for-profit providers, while part-time employment increases. The net employment effect in the public sector is negative when government services are moved to the for-profit sector. These combined effects result in a compositional shift toward more part-time public sector employment. © 2006 by the Association for Public Policy Analysis and Management

Suggested Citation

  • Sergio Fernandez & Craig R. Smith & Jeffrey B. Wenger, 2007. "Employment, privatization, and managerial choice: Does contracting out reduce public sector employment?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 26(1), pages 57-77.
    • Handle: RePEc:wly:jpamgt:v:26:y:2007:i:1:p:57-77
    DOI: 10.1002/pam.20227
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    References listed on IDEAS

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    1. David E. M. Sappington & Joseph E. Stiglitz, 1987. "Privatization, information and incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(4), pages 567-585.
    2. Williamson, Oliver E, 1999. "Public and Private Bureaucracies: A Transaction Cost Economics Perspective," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 306-342, April.
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    Cited by:

    1. Marius Constantin PROFIROIU & Septimiu Rares SZABO, 2016. "Outsourcing vs decentralisation: A comparative analysis in Central and Eastern Europe," Eco-Economics Review, Ecological University of Bucharest, Economics Faculty and Ecology and Environmental Protection Faculty, vol. 2(2), pages 3-26, December.

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