Political Preferences and Public Sector Outsourcing

28 Pages Posted: 16 Jun 2012

See all articles by Mikael Elinder

Mikael Elinder

Uppsala University - Department of Economics; Research Institute of Industrial Economics (IFN)

Henrik Jordahl

Örebro University - School of Business; Research Institute of Industrial Economics (IFN); CESifo; IZA

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Abstract

Given the intensive and ideologically charged debate over the use of private contractors for publicly funded services, it is somewhat surprising that many social scientists have preferred to explain government outsourcing by the pursuit of economic efficiency. Starting out from different theories, we investigate political explanations of government outsourcing using a Swedish data set in which outsourcing varies between municipalities and over time, as well as between services. Our identification strategy focuses on two services with similar contracting problems and local market conditions: preschools and primary schools. We study a period in which Swedish municipalities had full discretion in the provision of preschools, while their influence on the private provision of primary education was limited by a national voucher system. The comparison of preschools with primary schools in a difference-in-differences model suggests that the political color of the ruling majority influences outsourcing, which is consistent with the Citizen Candidate model of representative democracy.

Keywords: outsourcing, ideology, public provision, contracting out, child care, education

JEL Classification: D23, H11, H40, L33

Suggested Citation

Elinder, Mikael and Jordahl, Henrik, Political Preferences and Public Sector Outsourcing. IZA Discussion Paper No. 6632, Available at SSRN: https://ssrn.com/abstract=2085219 or http://dx.doi.org/10.2139/ssrn.2085219

Mikael Elinder (Contact Author)

Uppsala University - Department of Economics ( email )

Box 513
Uppsala, 751 20
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Henrik Jordahl

Örebro University - School of Business ( email )

SE-70182 Orebro, Örebro SE-701 82
Sweden

HOME PAGE: http://https://www.oru.se/personal/henrik_jordahl

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

HOME PAGE: http://www.ifn.se/hj

CESifo ( email )

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Munich, DE-81679
Germany

IZA ( email )

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