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Local privatization, intermunicipal cooperation,transaction costs and political interests: Evidence from Spain

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Author Info

  • Xavier Fageda

    ()
    (Faculty of Economics, University of Barcelona)

  • Germa Bel

    ()
    (Faculty of Economics, University of Barcelona)

Abstract

Several 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 Info

Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 200804.

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Length: 23 pages
Date of creation: Apr 2008
Date of revision: Apr 2008
Handle: RePEc:ira:wpaper:200804

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Postal: Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona
Web page: http://www.ub.edu/irea/
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Keywords: Privatization; contracting-out; local governments;

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References

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Citations

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Cited by:
  1. Miguel Santolino & Catalina Bolancé & Manuela Alcañiz, 2011. "Factors affecting hospital admission and recovery stay duration of in-patient motor victims in Spain," IREA Working Papers 201119, University of Barcelona, Research Institute of Applied Economics, revised Oct 2011.
  2. Germà Bel & Xavier Fageda & Melania Mur, 2011. "Why do municipalities cooperate to provide local public services? An empirical analysis," IREA Working Papers 201118, University of Barcelona, Research Institute of Applied Economics, revised Oct 2011.
  3. Juan Luis Jiménez & Jordi Perdiguero & Ancor Suárez, 2011. "Debating as a classroom tool for adapting learning outcomes to the European higher education area," IREA Working Papers 201109, University of Barcelona, Research Institute of Applied Economics, revised Jun 2011.
  4. Michael Artis & Ernest Miguélez & Rosina Moreno, 2009. "Assessing Agglomeration Economies in a Spatial Framework with Endogenous Regressors," SERC Discussion Papers 0023, Spatial Economics Research Centre, LSE.
  5. David Castells & Vicente Royuela, 2011. "Agglomeration, Inequality and Economic Growth," IREA Working Papers 201114, University of Barcelona, Research Institute of Applied Economics, revised Apr 2012.
  6. Lluís Bermúdez & Antoni Ferri & Montserrat Guillén, 2011. "A correlation sensitivity analysis of non-life underwriting risk in solvency capital requirement estimation," Working Papers XREAP2011-12, Xarxa de Referència en Economia Aplicada (XREAP), revised Sep 2011.

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