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Production Costs, Transaction Costs, and Local Government Contractor Choice

Author

Listed:
  • Ferris, James M
  • Graddy, Elizabeth

Abstract

Local governments that choose to externally produce a service can contract with other governments, for-profit firms, or nonprofit organizations. This contractor choice is modeled as one in which the local government decisionmaker minimizes service delivery costs, both production and transaction costs, subject to political and fiscal constraints. The model is estimated using data on three frequently contracted health services obtained from a national survey of local government service delivery arrangements. The empirical analysis reveals the importance of both production and transaction costs, as well as the choice set of available suppliers, to contractor choice. Copyright 1991 by Oxford University Press.

Suggested Citation

  • Ferris, James M & Graddy, Elizabeth, 1991. "Production Costs, Transaction Costs, and Local Government Contractor Choice," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 541-554, July.
    • Handle: RePEc:oup:ecinqu:v:29:y:1991:i:3:p:541-54
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    Citations

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    Cited by:

    1. Thornton Jeremy & Lecy Jesse, 2019. "Good Enough for Government Work? An Incomplete Contracts Approach to the Use of Nonprofits in U.S. Federal Procurement," Nonprofit Policy Forum, De Gruyter, vol. 10(3), pages 1-18, October.
    2. Bowman Cutter, W. & DeShazo, J.R., 2007. "The environmental consequences of decentralizing the decision to decentralize," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 32-53, January.
    3. Germà Bel & Mildred E. Warner, 2016. "Factors explaining inter-municipal cooperation in service delivery: a meta-regression analysis," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 19(2), pages 91-115, April.
    4. Gabriel OBERMANN, 2007. "The Role Of The State As Guarantor Of Public Services: Transaction Cost Issues And Empirical Evidence," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(3), pages 475-500, September.
    5. Yong-Mi Kim & Hee Joon Song, 2001. "Determinants of Information Systems (IS) Outsourcing in City Government," International Review of Public Administration, Taylor & Francis Journals, vol. 6(2), pages 103-113, December.
    6. Blaeschke, Frédéric & Haug, Peter, 2014. "Does Intermunicipal Cooperation Increase Efficiency? Evidence from the Hessian Wastewater Sector," IWH Discussion Papers 11/2014, Halle Institute for Economic Research (IWH).
    7. Joshua Steinfeld & Ron Carlee & Kouliga Koala, 2020. "DBFOM Contracting and Public Stewardship in the Norfolk-Portsmouth Elizabeth River Tunnels Public-Private Partnership," Public Organization Review, Springer, vol. 20(1), pages 37-62, March.
    8. Théodore METAXAS & Marie-Noëlle DUQUENNE, 2017. "Partnerships and development policies for small-medium enterprises in Greece: a CFA approach," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 45, pages 131-158.
    9. Savitski, David W., 2003. "Ownership selection in the US electric utility industry," Utilities Policy, Elsevier, vol. 11(4), pages 203-223, December.
    10. 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.
    11. Trevor L. Brown & Matthew Potoski, 2003. "Managing contract performance: A transaction costs approach," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 22(2), pages 275-297.
    12. Miles Finney, 1999. "Constituency Preference And Police Consolidation: The Case Of West Hollywood," Contemporary Economic Policy, Western Economic Association International, vol. 17(2), pages 235-242, April.
    13. Amir Hefetz & Mildred E Warner & Eran Vigoda-Gadot, 2012. "Privatization and Intermunicipal Contracting: The US Local Government Experience 1992–2007," Environment and Planning C, , vol. 30(4), pages 675-692, August.
    14. Trevor Brown & Matt Potoski, 2006. "Contracting for management: Assessing management capacity under alternative service delivery arrangements," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 25(2), pages 323-346.
    15. Richard J. Kish & Amy F. Lipton, 2013. "Do Private Prisons Really offer Savings Compared with their Public Counterparts?," Economic Affairs, Wiley Blackwell, vol. 33(1), pages 93-107, February.

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