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Production Costs, Transaction Costs, and Local Government Contractor Choice

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  • Ferris, James M
  • Graddy, Elizabeth

Abstract

Local governments that choose to externally produce a service can contract with other governments, for-profit firms, or nonprofit organizations. This contractor choice is modeled as one in which the local government decisionmaker minimizes service delivery costs, both production and transaction costs, subject to political and fiscal constraints. The model is estimated using data on three frequently contracted health services obtained from a national survey of local government service delivery arrangements. The empirical analysis reveals the importance of both production and transaction costs, as well as the choice set of available suppliers, to contractor choice. Copyright 1991 by Oxford University Press.

Suggested Citation

  • Ferris, James M & Graddy, Elizabeth, 1991. "Production Costs, Transaction Costs, and Local Government Contractor Choice," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 541-554, July.
  • Handle: RePEc:oup:ecinqu:v:29:y:1991:i:3:p:541-54
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    Cited by:

    1. repec:taf:rrpaxx:v:6:y:2001:i:2:p:103-113 is not listed on IDEAS
    2. Germa Bel & Xavier Fageda, 2008. "Reforming the local public sector: economics and politics in privatization of water and solid waste," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 11(1), pages 45-65.
    3. Blaeschke, Frédéric & Haug, Peter, 2014. "Does Intermunicipal Cooperation Increase Efficiency? Evidence from the Hessian Wastewater Sector," IWH Discussion Papers 11/2014, Halle Institute for Economic Research (IWH).
    4. Germà Bel & Mildred E. Warner, 2016. "Factors explaining inter-municipal cooperation in service delivery: a meta-regression analysis," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 19(2), pages 91-115, June.
    5. Miles Finney, 1999. "Constituency Preference And Police Consolidation: The Case Of West Hollywood," Contemporary Economic Policy, Western Economic Association International, vol. 17(2), pages 235-242, April.
    6. repec:tou:journl:v:45:y:2017:p:131-158 is not listed on IDEAS
    7. Richard J. Kish & Amy F. Lipton, 2013. "Do Private Prisons Really offer Savings Compared with their Public Counterparts?," Economic Affairs, Wiley Blackwell, vol. 33(1), pages 93-107, February.
    8. Savitski, David W., 2003. "Ownership selection in the US electric utility industry," Utilities Policy, Elsevier, vol. 11(4), pages 203-223, December.

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