Local privatization, intermunicipal cooperation,transaction costs and political interests: Evidence from Spain
AbstractSeveral empirical studies have analyzed the factors that influence local privatization. Variables related to fiscal stress, cost reduction, political processes and ideological attitudes are the most common explanatory variables used in these studies. In this paper, we add to this literature by examining the influence of transaction costs and political factors on local governments’ choices through new variables. In addition to this, we consider the role of additional aspects, such as intermunicipal cooperation as a potential alternative to privatization in order to exploit scale economies or scope economies. We consider two relevant services: solid waste collection and water distribution. Results from our estimates show that privatization (that is, contracting out to a private firm) is less common for water distribution than for solid waste collection. Higher transaction costs in water distribution are consistent with this finding. Furthermore, we find that municipalities with a conservative ruling party privatize more often regardless of the ideological orientation of the constituency. This shows that those political interests able to influence local elections are more important in determining the form of delivery than is the basic ideological stance of the constituency. Finally, we find that intermunicipal cooperation is an alternative to local privatization.
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Bibliographic InfoPaper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 200804.
Length: 23 pages
Date of creation: Apr 2008
Date of revision: Apr 2008
Privatization; contracting-out; local governments;
Find related papers by JEL classification:
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
- R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-31 (All new papers)
- NEP-GEO-2008-05-31 (Economic Geography)
- NEP-PBE-2008-05-31 (Public Economics)
- NEP-POL-2008-05-31 (Positive Political Economics)
- NEP-URE-2008-05-31 (Urban & Real Estate Economics)
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