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Fiscal pressures and the privatization of local services

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  • Yolanda Kodrzycki

Abstract

The privatization movement appears to have lost some momentum in the United States over the 1990s. Although local governments continue to look for ways to deliver services more efficiently by using private contractors, the pace at which they are issuing contracts has slowed. In part, the trends may reflect political realities. Public employees naturally are concerned about losing their jobs, and they constitute a sizable share of the electorate. The limited role of outside contractors may also reflect economic pragmatism, especially in the face of greater scrutiny of past efforts to privatize services.> Another influence may be the improving fiscal position of local governments. To the extent privatization has been a response to fiscal pressures, the growing fiscal comfort of local governments would lessen the degree to which they seek out low-cost providers. The author reviews trends in outside contracting by cities and towns between 1987 and 1992 and uses regression analysis to sort out the various influences. The results confirm that fiscal pressures, as evidenced by heavy debt burdens, did spur privatization in the early 1990s. She then examines localities' decisions to drop services altogether, and finds that contracting out and reducing services appear to have been alternatives, over this period. Cities and towns tended to choose one or the other course of action, not both.

Suggested Citation

  • Yolanda Kodrzycki, 1998. "Fiscal pressures and the privatization of local services," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 39-50.
  • Handle: RePEc:fip:fedbne:y:1998:i:jan:p:39-50
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    References listed on IDEAS

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    1. Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1997. "Privatization in the United States," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 447-471, Autumn.
    2. Yolanda Kodrzycki, 1994. "Privatization of local public services: lessons for New England," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 31-46.
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    Cited by:

    1. Thompson, Paul N., 2016. "School district and housing price responses to fiscal stress labels: Evidence from Ohio," Journal of Urban Economics, Elsevier, vol. 94(C), pages 54-72.
    2. Xavier Fageda & Germa Bel, 2008. "Local privatization, intermunicipal cooperation,transaction costs and political interests: Evidence from Spain," IREA Working Papers 200804, University of Barcelona, Research Institute of Applied Economics, revised Apr 2008.
    3. Mildred Warner & Robert Hebdon, 2001. "Local Government Restructuring: Privatization and Its Alternatives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 20(2), pages 315-336.
    4. Germà Bel & Xavier Fageda & Melania Mur, 2010. "¿Por qué se privatizan servicios en los municipios (pequeños)? Evidencia empírica sobre residuos sólidos y agua," Hacienda Pública Española / Review of Public Economics, IEF, vol. 192(1), pages 33-58, March.
    5. Emília Sičáková-Beblavá & Miroslav Beblavý, 2007. "Faktory ovplyvňujúce rozhodovanie o spôsobe zabezpečovania služieb vo veľkých slovenských mestách [Factors Influencing Decisions on Services Provision in major Slovak Cities]," Politická ekonomie, Prague University of Economics and Business, vol. 2007(2), pages 245-262.
    6. Germà Bel & Xavier Fageda, 2009. "Factors explaining local privatization: a meta-regression analysis," Public Choice, Springer, vol. 139(1), pages 105-119, April.
    7. Germa Bel & Xavier Fageda, 2008. "Reforming the local public sector: economics and politics in privatization of water and solid waste," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 11(1), pages 45-65.
    8. Thompson, Paul N., 2017. "Effects of fiscal stress labels on municipal government finances, housing prices, and the quality of public services: Evidence from Ohio," Regional Science and Urban Economics, Elsevier, vol. 64(C), pages 98-116.
    9. Athias, Laure & Wicht, Pascal, 2014. "Cultural Biases in Public Service Delivery: Evidence from a Regression Discontinuity Approach," MPRA Paper 60639, University Library of Munich, Germany.
    10. Roberto Martínez-Espiñeira & Maria A. García-Valiñas & Francisco González-Gómez, 2009. "Does Private Management of Water Supply Services Really Increase Prices? An Empirical Analysis in Spain," Urban Studies, Urban Studies Journal Limited, vol. 46(4), pages 923-945, April.
    11. Meeyoung Lamothe & Scott Lamothe, 2015. "Exploring the Determinants of Local Service Termination," Social Science Quarterly, Southwestern Social Science Association, vol. 96(5), pages 1453-1474, November.
    12. Bertacchini, Enrico & Dalle Nogare, Chiara, 2014. "Public provision vs. outsourcing of cultural services: Evidence from Italian cities," European Journal of Political Economy, Elsevier, vol. 35(C), pages 168-182.
    13. Jorge Guardiola & Francisco González-Gómez & Miguel A. García-Rubio, 2008. "Is the time dimension really important in research into contracting out?," FEG Working Paper Series 08/02, Faculty of Economics and Business (University of Granada).

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