Contracting for Government Services: Theory and Evidence from U.S. Cities
AbstractLocal governments can provide services with their own employees or by contracting with private or public sector providers. We develop a model of this "make-or-buy" choice that highlights the trade-off between productive efficiency and the costs of contract administration. We construct a dataset of service provision choices by U.S. cities and identify a range of service and city characteristics as significant determinants of contracting decisions. Our analysis suggests an important role for economic efficiency concerns, as well as politics, in contracting for government services.
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Date of creation: Aug 2007
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Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-02 (All new papers)
- NEP-GEO-2007-09-02 (Economic Geography)
- NEP-PBE-2007-09-02 (Public Economics)
- NEP-URE-2007-09-02 (Urban & Real Estate Economics)
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