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Privatization in the United States

  • Florencio Lopez-de-Silane
  • Andrei Shleifer
  • Robert W. Vishny

In the United States, the two principal modes of producing local government services are inhouse provision by government employees and contracting out to private suppliers, also known as privatization. We examine empirically how United States counties choose their mode of providing services. The evidence indicates that state clean- government laws and state laws restricting county spending encourage privatization, whereas strong public unions discourage it. The evidence is inconsistent with the view that efficiency considerations alone govern the provision mode, and points to the important roles played by political patronage and taxpayer resistance to government spending in the privatization decision.

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File URL: http://www.nber.org/papers/w5113.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5113.

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Date of creation: May 1995
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Publication status: published as Rand Journal of Economics, Vol. 28, no. 3 (1997): 447-471.
Handle: RePEc:nbr:nberwo:5113
Note: CF PE
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