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What Happens when Municipalities Run Corporations? Empirical Evidence from 290 Swedish Municipalities

Author

Listed:
  • Bergh, Andreas

    (Department of Economics, Lund)

  • Erlingsson, Gissur Ó

    (Centre for Local Government Studies, Linköping University)

  • Wittberg, Emanuel

    (Centre for Local Government Studies and the Institute for Analytical Sociology, Linköping University)

Abstract

Across the globe, local governments have increasingly begun to rely on municipally owned corporations (MOCs) to provide public services, mounting to what scholars describe as a burgeoning corporatization in local government. Some studies have described this development as a rational response to financial stress and contemporary austerity challenges, and emphasise the cost-efficiency of MOCs (the optimistic view). However, several scholars have identified problems associated MOCs relating to weak steering and supervision, lack of accountability, and heightened corruption risks (the sceptical view). Hitherto, no studies have tested these diametrically opposing expectations on the effects MOCs in the one and same analysis. This paper addresses the competing views by studying Sweden, a country with a dramatic growth in the number of MOCs since the 1970s. We examine the association between the number of MOCs, citizen satisfaction with local government, local tax rates and a survey-based corruption measure for all 290 Swedish municipalities. Ultimately questioning the ‘optimistic view’, the results indicate that municipalities that rely heavily on MOCs in service delivery have higher taxes, not more satisfied citizens, and are associated with higher corruption levels.

Suggested Citation

  • Bergh, Andreas & Erlingsson, Gissur Ó & Wittberg, Emanuel, 2020. "What Happens when Municipalities Run Corporations? Empirical Evidence from 290 Swedish Municipalities," Working Paper Series 1353, Research Institute of Industrial Economics, revised 23 Oct 2020.
    • Handle: RePEc:hhs:iuiwop:1353
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    References listed on IDEAS

    as
    1. Jacob Aars & Hans-Erik Ringkjøb, 2011. "Local Democracy Ltd," Public Management Review, Taylor & Francis Journals, vol. 13(6), pages 825-844, September.
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    More about this item

    Keywords

    Municipally owned corporations; Corruption; Arms-length principle; Hybridorganizations; Quasi-privatization; New public management;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H79 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other

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