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The impact of government outsourcing on public spending: Evidence from European Union countries

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

Abstract

Reducing public spending was a major objective when governments across Europe increasingly turned to outsourcing as a mode of public service provision from the 1980s. Today, despite its prevalence, there is still little consensus in the literature on whether outsourcing is an effective policy as regards reducing spending. Using a panel data model for 25 European countries over the period 1990–2011, this article tests whether outsourcing actually led to a reduction in public spending. Results indicate that outsourcing failed to reduce government expenditures at the central government level. This finding persists even after controlling for expenditure dynamics and addressing potential endogeneity issues.

Suggested Citation

  • Alonso, José M. & Clifton, Judith & Díaz-Fuentes, Daniel, 2017. "The impact of government outsourcing on public spending: Evidence from European Union countries," Journal of Policy Modeling, Elsevier, vol. 39(2), pages 333-348.
    • Handle: RePEc:eee:jpolmo:v:39:y:2017:i:2:p:333-348
    DOI: 10.1016/j.jpolmod.2017.01.007
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    Cited by:

    1. Niklas Potrafke, 2019. "Does Public Sector Outsourcing Decrease Public Employment? Empirical Evidence from OECD Countries," CESifo Economic Studies, CESifo Group, vol. 65(4), pages 464-484.
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    3. Mar Delgado-Téllez & José Federico Geli & Enrique Moral-Benito & Javier J. Pérez, 2022. "Outsourcing and public expenditure: an aggregate perspective with regional data," Regional Studies, Taylor & Francis Journals, vol. 56(8), pages 1347-1358, August.
    4. João Paulo Santos Aragão & Marcele Elisa Fontana, 2022. "Outsourcing Strategies in Public Services under Budgetary Constraints: Analysing Perceptions of Public Managers," Public Organization Review, Springer, vol. 22(1), pages 61-77, March.
    5. Khan, Qasim Raza & Xinshu, Mao & Qamri, Ghulam Muhammad & Nawaz, Ahmad, 2023. "From COVID to conflict: Understanding the deriving forces of environment and implications for natural resources," Resources Policy, Elsevier, vol. 83(C).
    6. Andrej Christian Lindholst & Morten Balle Hansen & Thomas Barfoed Randrup & Bengt Persson & Anders Kristoffersson, 2018. "The many outcomes from contracting out: The voice of public managers," Environment and Planning C, , vol. 36(6), pages 1046-1067, September.

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    More about this item

    Keywords

    Outsourcing; Government expenditure; Panel data; Europe;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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