Privatization in the United States

Abstract

In the United States, the two principal modes of producing local government services are in-house provision by government employees and contracting out to private suppliers, also known as privatization. We examine empirically how U.S. counties choose the mode of providing services. The evidence indicates that state clean-government laws and state laws restricting county spending encourage privatization, whereas strong public unions discourage it. This points to the important roles played by political patronage and taxpayer resistance to government spending in the privatization decision.

JEL Classification: H41, H72, H79, L33