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What happens when municipalities run corporations? Empirical evidence from 290 Swedish municipalities

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  • Andreas Bergh
  • Gissur Ó Erlingsson
  • Emanuel Wittberg

Abstract

Local governments are increasingly relying on municipally owned corporations (MOCs) to provide public services. Some describe this development as a rational response to austerity challenges and emphasise the cost-efficiency of MOCs (‘the optimistic view’). Others identify complications and associate MOCs with weak supervision, lack of accountability, and corruption risks (‘the sceptical view’). Hitherto, no studies have analysed these opposing claims on MOCs in the one and same inquiry. We address this gap by focusing on Sweden, which has experienced a dramatic growth in the number of MOCs. We examine the association between the number of MOCs, the business climate, satisfaction with local government, local tax rates, and a corruption index for all 290 Swedish municipalities. Putting the ‘optimistic view’ into doubt, results indicate that municipalities relying heavily on MOCs are associated with more perceived corruption and higher taxes but do not have more satisfied citizens nor a better business climate.

Suggested Citation

  • Andreas Bergh & Gissur Ó Erlingsson & Emanuel Wittberg, 2022. "What happens when municipalities run corporations? Empirical evidence from 290 Swedish municipalities," Local Government Studies, Taylor & Francis Journals, vol. 48(4), pages 704-727, July.
    • Handle: RePEc:taf:flgsxx:v:48:y:2022:i:4:p:704-727
    DOI: 10.1080/03003930.2021.1944857
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    1. Jacob Aars & Hans-Erik Ringkjøb, 2011. "Local Democracy Ltd," Public Management Review, Taylor & Francis Journals, vol. 13(6), pages 825-844, September.
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    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H79 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other

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