Macro Outsourcing: Evaluating Government Reliance on the Private Sector
Journal of Politics, Forthcoming
38 Pages Posted: 7 Sep 2021
Date Written: January 10, 2021
Government outsourcing of services to private sector entities is increasingly common. The conventional wisdom ties governments’ outsourcing decisions to either an ideological preference for market-based solutions or to fiscal pressures; however, these conjectures have not been systematically subjected to empirical scrutiny. I develop an aggregate annual measure of U.S. state-level outsourcing decisions—macro outsourcing—and explore whether the evidence supports these pathways. I also point to an under-appreciated political pathway by which potential losers—bureaucrats organized into public sector unions—affect the decision to outsource. The results offer little support for the received wisdom and instead demonstrate that states with strong unions are less likely to rely on private actors. I bolster this finding with preliminary analyses showing that states with laws that sap union power exhibit higher levels of outsourcing. Overall, these results show that outsourcing is a decidedly political phenomenon, albeit via an unexpected route.
Keywords: outsourcing, privatization, ideology, government spending, unions
JEL Classification: H57, L33
Suggested Citation: Suggested Citation