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Dynamics of service provision: service, market and place characteristics


  • Amir HEFETZ


  • Mildred E. WARNER



Analysis of local government contracting decisions typically focuses on transactions costs related to service characteristics, especially asset specificity and difficulty of contract management. This analysis expands the focus to include market characteristics (competition), citizen characteristics (public interest in the service delivery process), and place characteristics (metro status). Direct surveys of city managers’ rankings of 67 services by transactions costs, competition and citizen interest are combined with data on city managers’ sourcing decisions (direct public, inter-government cooperation, for profit and non profit contracting). Multinomial logit models of service delivery sourcing choice find metro status and competition are key explanatory variables. Inter-governmental cooperation represents an important public market alternative when contract management is difficult and competition is low. For profit contracting is less common when citizen interest is high and competition is low. Differences by metro status show the highest rates of contracting among suburbs.

Suggested Citation

  • Amir HEFETZ & Mildred E. WARNER, 2010. "Dynamics of service provision: service, market and place characteristics," Departmental Working Papers 2010-33, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2010-33

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    References listed on IDEAS

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    More about this item


    Contracting; privatization; transaction costs; competition; citizen interest;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise


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