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Public Choice (2012) 153:469485
DOI 10.1007/s11127-011-9803-1
Anders Sundell Victor Lapuente
Received: 23 June 2010 / Accepted: 17 May 2011 / Published online: 21 June 2011 Springer Science+Business Media, LLC 2011
Abstract Why do some local governments deliver public services directly while others rely on providers from the private sector? Previous literature on local contracting out and on the privatization of state-owned enterprises have offered two competing interpretations on why center-right governments rely more on private providers. Some maintain that center-right politicians contract out more because, like Adam Smith, they believe in market competition. Others claim that center-right politicians use privatization in a Machiavellian fashion; it is used as a strategy to retain power, by purchasing the electoral support of certain constituencies. Using a unique dataset, which includes the political attitudes of over 8,000 Swedish local politicians from 290 municipalities for a period of 10 years, this paper tests these ideological predictions together with additional political economy factors which have been overlooked in previous studies, such as the number of veto players. Results rst indicate support for the Machiavellian interpretation, as contracting out increases with electoral competition. Second, irrespective of ideological concerns, municipalities with more veto players in the coalition government contract out fewer services.
Keywords Contracting out Local government Veto players Electoral competition
Governments have traditionally relied on public bureaucracies to deliver public services. Albeit far from homogeneously, governments are increasingly using alternative ways to produce services, such as quasi-markets, voucher schemes, or contracting out, which are generally referred to as New Public Management (NPM) tools (Dunleavy et al. 2006). Among these NPM reforms, the contracting out of public services to the private sector is one of the most debated reforms both among policy makers and scholars as it may easily
A. Sundell V. Lapuente ( )
The Quality of Government Institute, University of Gothenburg, Box 711, Sprngkullsgatan 19, 405 30 Gothenburg, Swedene-mail: mailto:[email protected]
Web End [email protected]
A. Sundelle-mail: mailto:[email protected]
Web End [email protected]
Adam Smith or Machiavelli? Political incentives for contracting out local public services
470 Public Choice (2012) 153:469485
be interpreted along ideological lines. Contracting out allows a more market-oriented approach to government compared with other reforms because it emphasizes (and rewards) performance, and implies a scaling back of bureaucratic institutions (Lynn 2006).
Ideological...