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Fiscal pressures and the privatization of local services

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  • Yolanda K. Kodrzycki

Abstract

The privatization movement appears to have lost some momentum in the United States over the 1990s. Although local governments continue to look for ways to deliver services more efficiently by using private contractors, the pace at which they are issuing contracts has slowed. In part, the trends may reflect political realities. Public employees naturally are concerned about losing their jobs, and they constitute a sizable share of the electorate. The limited role of outside contractors may also reflect economic pragmatism, especially in the face of greater scrutiny of past efforts to privatize services.> Another influence may be the improving fiscal position of local governments. To the extent privatization has been a response to fiscal pressures, the growing fiscal comfort of local governments would lessen the degree to which they seek out low-cost providers. The author reviews trends in outside contracting by cities and towns between 1987 and 1992 and uses regression analysis to sort out the various influences. The results confirm that fiscal pressures, as evidenced by heavy debt burdens, did spur privatization in the early 1990s. She then examines localities' decisions to drop services altogether, and finds that contracting out and reducing services appear to have been alternatives, over this period. Cities and towns tended to choose one or the other course of action, not both.

Suggested Citation

  • Yolanda K. Kodrzycki, 1998. "Fiscal pressures and the privatization of local services," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 39-50.
  • Handle: RePEc:fip:fedbne:y:1998:i:jan:p:39-50
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    References listed on IDEAS

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    1. Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1997. "Privatization in the United States," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 447-471, Autumn.
    2. Yolanda K. Kodrzycki, 1994. "Privatization of local public services: lessons for New England," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 31-46.
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    1. repec:eee:regeco:v:64:y:2017:i:c:p:98-116 is not listed on IDEAS
    2. Thompson, Paul N., 2016. "School district and housing price responses to fiscal stress labels: Evidence from Ohio," Journal of Urban Economics, Elsevier, vol. 94(C), pages 54-72.
    3. Bertacchini, Enrico & Dalle Nogare, Chiara, 2014. "Public provision vs. outsourcing of cultural services: Evidence from Italian cities," European Journal of Political Economy, Elsevier, vol. 35(C), pages 168-182.
    4. Germà Bel & Xavier Fageda & Melania Mur, 2010. "¿Por qué se privatizan servicios en los municipios (pequeños)? Evidencia empírica sobre residuos sólidos y agua," Hacienda Pública Española, IEF, vol. 192(1), pages 33-58, March.
    5. Xavier Fageda & Germa Bel, 2008. "Local privatization, intermunicipal cooperation,transaction costs and political interests: Evidence from Spain," IREA Working Papers 200804, University of Barcelona, Research Institute of Applied Economics, revised Apr 2008.
    6. Germà Bel & Xavier Fageda, 2009. "Factors explaining local privatization: a meta-regression analysis," Public Choice, Springer, vol. 139(1), pages 105-119, April.
    7. Mildred Warner & Robert Hebdon, 2001. "Local Government Restructuring: Privatization and Its Alternatives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 20(2), pages 315-336.

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    Keywords

    Privatization;

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