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Testing the Validity of the Brown-Potoski Model in the Czech and Slovak Republics


  • Jan Pavel
  • Emilia Sičáková-Beblavá


This paper is based on the new institutional economic approach, which focuses on analysis between services features (asset specificity, outcome measurability) and their eligibility to contract out. This issue, which de facto constitutes one of the subsets of the "make or buy decision" issue, is also analysed by the so-called Brown-Potoski model. It analyses the relations between selected features of a demanded service and its suitability or unsuitability for outsourcing, whilst making use of information about transaction costs economy. Using data from 100 Czech municipalities and 100 Slovak municipalities, the viability of the Brown-Potoski model is tested. The results of the research show that a connection was identified between the measurability of the required service and its suitability for external provision, but the relationship between the specificity of investments and the suitability for external provision was not. The reason is probably the previous financial demands of the initial investment, which is, above all in the case of small municipalities, beyond their budgetary means.

Suggested Citation

  • Jan Pavel & Emilia Sičáková-Beblavá, 2009. "Testing the Validity of the Brown-Potoski Model in the Czech and Slovak Republics," Prague Economic Papers, University of Economics, Prague, vol. 2009(4), pages 327-341.
  • Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:4:id:357:p:327-341

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    References listed on IDEAS

    1. Emília Sičáková-Beblavá & Miroslav Beblavý, 2007. "Faktory ovplyvňujúce rozhodovanie o spôsobe zabezpečovania služieb vo veľkých slovenských mestách
      [Factors Influencing Decisions on Services Provision in major Slovak Cities]
      ," Politická ekonomie, University of Economics, Prague, vol. 2007(2), pages 245-262.
    2. Jens Lundsgaard, 2003. "Competition and Efficiency in Publicly Funded Services," OECD Economic Studies, OECD Publishing, vol. 2002(2), pages 79-128.
    3. Miroslav Beblavý, 2002. "Understanding the waves of agencification and the governance problems they have raised in Central and Eastern European Countries," OECD Journal on Budgeting, OECD Publishing, vol. 2(1), pages 121-139.
    4. Simon Domberger & Stephen Rimmer, 1994. "Competitive Tendering and Contracting in the Public Sector: A Survey," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(3), pages 439-453.
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    More about this item


    Czech Republic; Brown-Potoski model; public services; Slovak Republic; transaction costs;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures


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