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Political Preferences and Public Sector Outsourcing

  • Elinder, Mikael


    (Uppsala University)

  • Jordahl, Henrik


    (Research Institute of Industrial Economics)

Given the intensive and ideologically charged debate over the use of private contractors for publicly funded services, it is somewhat surprising that many social scientists have preferred to explain government outsourcing by the pursuit of economic efficiency. Starting out from different theories, we investigate political explanations of government outsourcing using a Swedish data set in which outsourcing varies between municipalities and over time, as well as between services. Our identification strategy focuses on two services with similar contracting problems and local market conditions: preschools and primary schools. We study a period in which Swedish municipalities had full discretion in the provision of preschools, while their influence on the private provision of primary education was limited by a national voucher system. The comparison of preschools with primary schools in a difference-in-differences model suggests that the political color of the ruling majority influences outsourcing, which is consistent with the Citizen Candidate model of representative democracy.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6632.

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Length: 28 pages
Date of creation: Jun 2012
Date of revision:
Publication status: published in: European Journal of Political Economy, 2013, 30, 43-57
Handle: RePEc:iza:izadps:dp6632
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