Working Paper: NBER ID: w13350
Authors: Jonathan Levin; Steven Tadelis
Abstract: Local governments can provide services with their own employees or by contracting with private or public sector providers. We develop a model of this "make-or-buy" choice that highlights the trade-off between productive efficiency and the costs of contract administration. We construct a dataset of service provision choices by U.S. cities and identify a range of service and city characteristics as significant determinants of contracting decisions. Our analysis suggests an important role for economic efficiency concerns, as well as politics, in contracting for government services.
Keywords: government services; contracting; privatization; local government; public administration
JEL Codes: D23; D73; H11; L33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Service Frequency and Quality Sensitivity (L15) | Privatization Likelihood (L33) |
| Governance Type (H11) | Contracting for Services (M55) |
| Privatization (L33) | City Expenditures (H76) |
| Contracting Difficulty (D86) | Privatization Likelihood (L33) |
| Contracting Experience (M55) | Future Privatization Decisions (L33) |