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Did New Public Management Matter? An Empirical Analysis of The Outsourcing and Decentralization Effects on Public Sector Size


  • Alonso, Jose M.
  • Clifton, Judith
  • Díaz-Fuentes, Daniel


This paper evaluates whether reforms associated with the New Public Management (NPM) doctrine led to a reduction in public sector expenditure and employees. Savings and downsizing the public sector were a major justification when the international movement of public sector reforms began in the 1980s. Since then, NPM has been the subject of extensive academic debate as to its successes and failures. However, empirical assessments of whether NPM reached its stated objectives are relatively scarce, mainly due to the difficulty of quantifying the impact of such reforms. This paper is an attempt to do this, especially looking at outsourcing and decentralization. We test a number of hypotheses related to the outsourcing and decentralization effects on public sector expenditure and employees through an econometric analysis using a panel data model for eighteen European Countries over the period 1980 to 2010. The results suggest a positive correlation between the degree of outsourcing in the provision of public services and government spending in the short term. On the other hand we find that decentralization tends to decrease the size of general government, particularly in the long-run.

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  • Alonso, Jose M. & Clifton, Judith & Díaz-Fuentes, Daniel, 2011. "Did New Public Management Matter? An Empirical Analysis of The Outsourcing and Decentralization Effects on Public Sector Size," MPRA Paper 43255, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43255

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    Cited by:

    1. repec:eee:jpolmo:v:39:y:2017:i:2:p:333-348 is not listed on IDEAS
    2. Marius Constantin PROFIROIU & Septimiu Rares SZABO, 2016. "Outsourcing vs decentralisation: A comparative analysis in Central and Eastern Europe," Eco-Economics Review, Ecological University of Bucharest, Economics Faculty and Ecology and Environmental Protection Faculty, pages 3-26.
    3. Simona Pichova & Jan Stejskal, 2015. "Return-on-investment of public investments to systems which provide public services ? a case study," ERSA conference papers ersa15p1399, European Regional Science Association.
    4. Sotiris Theodoropoulos, 2012. "Seeking a sustainable size and structure for the Greek public sector’s activities according to the fiscal pact for Euro," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 62(3-4), pages 75-92, July - De.

    More about this item


    New Public Management; outsourcing; decentralization; public sector size;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out


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