Did New Public Management Matter? An Empirical Analysis of the Outsourcing and Decentralization Effects on Public Sector Size

COCOPS Working Paper Series

38 Pages Posted: 13 Dec 2012

See all articles by Jose M. Alonso

Jose M. Alonso

University of Cantabria - Department of Economics

Judith Clifton

University of Cantabria

Daniel Díaz-Fuentes

Universidad de Cantabria

Date Written: December 14, 2011

Abstract

This paper evaluates whether reforms associated with the New Public Management (NPM) doctrine led to a reduction in public sector expenditure and employees. Savings and downsizing the public sector were a major justification when the international movement of public sector reforms began in the 1980s. Since then, NPM has been the subject of extensive academic debate as to its successes and failures. However, empirical assessments of whether NPM reached its stated objectives are relatively scarce, mainly due to the difficulty of quantifying the impact of such reforms. This paper is an attempt to do this, especially looking at outsourcing and decentralization. We test a number of hypotheses related to the outsourcing and decentralization effects on public sector expenditure and employees through an econometric analysis using a panel data model for eighteen European Countries over the period 1980 to 2010. The results suggest a positive correlation between the degree of outsourcing in the provision of public services and government spending in the short term. On the other hand we find that decentralization tends to decrease the size of general government, particularly in the long-run

Keywords: New Public Management, outsourcing, decentralization, public sector size

JEL Classification: H10, H63, H77, L33

Suggested Citation

Alonso, Jose M. and Clifton, Judith and Diaz-Fuentes, Daniel, Did New Public Management Matter? An Empirical Analysis of the Outsourcing and Decentralization Effects on Public Sector Size (December 14, 2011). COCOPS Working Paper Series . Available at SSRN: https://ssrn.com/abstract=2187902 or http://dx.doi.org/10.2139/ssrn.2187902

Jose M. Alonso

University of Cantabria - Department of Economics ( email )

Av. Los Castros s/n
Santander 39005, Cantabria 39005
Spain

Judith Clifton (Contact Author)

University of Cantabria ( email )

Avda. Los Castros, s/n
Santander 39005
Spain

Daniel Diaz-Fuentes

Universidad de Cantabria ( email )

Av. Los Castros s/n
Santander 39005, Cantabria 39005
Spain

HOME PAGE: http://personales.unican.es/diazd/

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