Drivers of service delivery modes in Dutch local government: an analysis over time and across domains

Abstract

This study investigates the influence of service, financial and political characteristics on municipalities’ choices of four service delivery modes in the Dutch local government setting, thereby making a distinction between services in the physical and in the operational domain. It shows that, overall, use of inter-municipal cooperation and, to a lesser extent, municipality-owned firms increased substantially from 2010 to 2018. For use of private firms, we find remarkable differences. Whereas this use increased for the physical domain, it decreased for the operational domain. For both domains, we find that in-house production decreased substantially. We also find that the influence of especially transaction cost characteristics on the likelihood that municipalities choose a certain institutional form differs between 2010 and 2018, as well as between the physical and the operational domain.

Points for practitioners
Our finding that the use of in-house production decreased substantially from 2010 to 2018 suggests that municipalities are looking for mixed institutional forms, such as inter-municipal cooperation, to realize economies of scale. We observe that service delivery modes are especially driven by service characteristics, thereby stressing the importance of transaction cost motives in decisions about service delivery modes. However, our study also shows that financial and political characteristics have some influence. As the effects of the latter are not stable, we show that the way to implement reforms may vary over time and across domains.

Full text

Article
International
Review of
Administrative
Sciences
Drivers of service
delivery modes in Dutch
local government: an
analysis over time and
across domains
Martijn Schoute
Vrije Universiteit Amsterdam, The Netherlands
Raymond Gradus
Vrije Universiteit Amsterdam, The Netherlands
Tjerk Budding
Vrije Universiteit Amsterdam, The Netherlands
Abstract
This study investigates the influence of service, financial and political characteristics on
municipalities’ choices of four service delivery modes in the Dutch local government
setting, thereby making a distinction between services in the physical and in the oper-
ational domain. It shows that, overall, use of inter-municipal cooperation and, to a
lesser extent, municipality-owned firms increased substantially from 2010 to 2018.
For use of private firms, we find remarkable differences. Whereas this use increased
for the physical domain, it decreased for the operational domain. For both domains, we
find that in-house production decreased substantially. We also find that the influence of
especially transaction cost characteristics on the likelihood that municipalities choose a
certain institutional form differs between 2010 and 2018, as well as between the phys-
ical and the operational domain.
Corresponding author:
Martijn Schoute, Vrije Universiteit Amsterdam, School of Business and Economics, Department of
Accounting, De Boelelaan 1105, Room 7A-75, 1081 HV Amsterdam, The Netherlands.
Email: m.schoute@vu.nl
International Review of Administrative
Sciences
0(0) 1–15
!The Author(s) 2020
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/0020852320968906
journals.sagepub.com/home/ras

Points for practitioners
Our finding that the use of in-house production decreased substantially from 2010 to
2018 suggests that municipalities are looking for mixed institutional forms, such as
inter-municipal cooperation, to realize economies of scale. We observe that service
delivery modes are especially driven by service characteristics, thereby stressing the
importance of transaction cost motives in decisions about service delivery modes.
However, our study also shows that financial and political characteristics have some
influence. As the effects of the latter are not stable, we show that the way to implement
reforms may vary over time and across domains.
Keywords
inter-municipal cooperation, local government, municipality-owned firms, re-municipal-
ization, service delivery modes
JEL codes
H76, L33
Introduction
1
A large and growing body of research examines municipalities’ choices of service
delivery modes, that is, what institutional forms municipalities use to produce and
deliver their services. Largely, this research mainly focuses on services, such as
garbage collection, for which data are widely publicly available. Also, most
research is cross-sectional in nature (i.e. studying how choices of service delivery
modes are related to service and/or municipal characteristics at some point in
time), though there are also some longitudinal studies that focus on changes in
these choices over time (see Bel and Fageda, 2017).
Furthermore, this literature has focused primarily on the classic ‘make or buy’
choice. In this regard, studies have sought to examine the outcomes of these
choices, focusing their attention especially on whether public or private production
results in lower delivery costs (e.g. Bel et al., 2010). The outcomes of the privat-
ization of local services have been mixed given that contracting services out to
private parties has not always produced the results expected by its promoters.
Potential explanatory factors for this mixed record include the variable transaction
costs incurred in the management of direct and privatized service delivery (Brown
and Potoski, 2005) and the non-competitive and concentrated nature of local ser-
vice markets (Bel and Costas, 2006; Dijkgraaf and Gradus, 2007).
In addition to these strictly public and private dimensions, other notable insti-
tutional forms exist, including inter-municipal cooperation and municipality-
owned firms. Several European countries show a trend towards corporatization
or more use of municipality-owned firms (for recent overviews, see Tavares, 2017;
2International Review of Administrative Sciences 0(0)

Voorn et al., 2017). While privatization was mainly based on the benefits of com-
petition, inter-municipal cooperation reflects the importance of collaboration to
achieve economies of scale and reduce externalities. Based on 1998–2005 data,
Dijkgraaf and Gradus (2008) found some evidence that contracting out or privatiz-
ing Dutch waste collection leads to lower costs, though Dijkgraaf and Gradus
(2013) showed that cooperation between municipalities can also be an efficient
delivery mode. This is in line with a meta-regression by Bel et al. (2010), which
suggests that cost savings from privatizing solid waste collection erode after 2000.
In a review of 37 empirical studies on contracting out local services between 2000
and 2014, Petersen et al. (2018) show that, on average, the cost difference between
private and public production decreased from 8.5% in 2000–2004 to 0.4% in 2010–
2014. They also find that, in their sample, the cost savings for contracting out
technical services, such as garbage collection and parking management, are 6%,
whereas for social services, such as healthcare and schools, these are 0%.
Whereas many municipal services were privatized from the 1980s onwards,
there are indications of opposite developments. For US local government,
Hefetz and Warner (2004) found that, in 1997, 18% of the services were contracted
out over the previous five years, and 11% had been contracted back in. Five years
later, the same authors (Hefetz and Warner, 2007) observed that contracting back
in became more popular (18%) than contracting out (12%). In a recent study,
Warner and Aldag (forthcoming) found that 14% of the US local governments
contracted services back in over the period 2012–2015. A similar trend can be
observed in Europe: Gradus and Budding (2020) found that 38% of the changes
in the modes of garbage collection in the period 1999–2010 were insourcing. This
percentage increased to 44% for the period 2011–2014, so contracting in and out
are more equal. Analysing the same service in Germany, Demuth et al. (2018) even
found a percentage of 93% towards in-house services. Based on a review of both
quantitative and qualitative studies, Clifton et al. (forthcoming) conclude that re-
munipalization is part of a broader set of re-privatization options and mostly a
pragmatic choice.
There are also indications for reverse privatization of services besides garbage
collection in the Netherlands. Gradus et al. (forthcoming) analysed shifts in the
delivery mode of 12 municipal services between 2010 and 2018 for 20 municipal-
ities. They found that inter-municipal cooperation increased from 8% in 2010 to
24% in 2018 and use of municipality-owned firms from 8% in 2010 to 13% in
2018. In contrast, in-house production and use of private firms declined.
Interestingly, in the physical domain, with services such as maintenance of roads
and green spaces, there was a large decrease of in-house production and increase of
inter-municipal cooperation, as well as a modest increase of use of municipality-
owned and private firms. In the operational domain, with services such as infor-
mation and communication technology (ICT) and cleaning, there was a large
increase of inter-municipal cooperation and decrease of use of private firms
between 2010 and 2018. This is interesting as the early literature indicates that
cleaning services contracts suggest cost savings of about 20% without
Schoute et al. 3

sacrificing the quality of service provided (e.g. Christoffersen et al., 2007;
Domberger et al., 1995). However, based on more recent data, Elkomy et al.
(2019) point out that quality is recently reducing due to the contracting out of
hospital cleaning services.
The purpose of this article is to extend the empirical analysis on explaining the
delivery mode of services other than garbage collection in the Netherlands and to
explore its drivers. Following Schoute et al. (2018), we analyse the influence of
service, financial and political characteristics
2
on municipalities’ choices of service
delivery modes for 11 municipal services. Whereas Schoute et al. (2018) only use
data for 2010, this article also takes data for 2018 into account. This enables us to
analyse effects over time, thereby making explicit the differences between both
years. Furthermore, we explore differences between two domains (the physical
domain and the operational domain) in this study. We discuss these differences
as well as (possible) explanations. In doing so, this article aims to contribute to the
literature on the drivers of service delivery mode choices, more specifically,
insourcing and outsourcing decisions, by including both the time dimension and
differences between domains.
The remainder of this article is structured as follows. First, the second section
describes the changes in municipal service management over time. This is followed
by the third section about the drivers of service delivery modes. The results are
presented and discussed in the fourth section. Finally, the fifth section offers some
concluding remarks and topics for future research.
Changes in municipal service management
We collected our data on municipalities’ choices of service delivery modes from
two surveys.
3
First, in 2010, we surveyed all 430 Dutch municipalities except the
four largest (cf. Groot and Budding, 2004), and obtained 86 usable responses
(20.2%). Second, in 2018, we surveyed all 380 Dutch municipalities, and
obtained 113 usable responses (29.7%). The municipalities that responded to
each of the two surveys are representative of all Dutch municipalities.
4
In prin-
ciple, we could have had 2178 observations (198 municipalities multiplied by 11
services); however, due to missing values, we actually have 1964 observations as
some municipalities do not have certain services (in particular, catering, cafeteria
and parking management). We distinguish between four service delivery modes
(cf. Schoute et al., 2018): in-house production, inter-municipal cooperation,
municipality-owned firm and private firm. From a legal perspective, in-house
production and inter-municipal cooperation are subject to public law, whereas
municipality-owned and private firms are subject to private law. Municipality-
owned firms thus operate under Dutch private law, while their shares are owned
by municipalities.
4International Review of Administrative Sciences 0(0)

Changes in patterns of service delivery modes
Our data set makes it possible to examine changes in patterns of service delivery
modes over time. As shown in Table 1 (available at: https://journals.sagepub.com/
doi/suppl/10.1177/0020852320968906), overall, inter-municipal cooperation (and,
to a lesser extent, use of municipality-owned firms) increased significantly between
2010 and 2018, whereas in-house production and use of private firms declined.
More specifically, in-house production decreased from 61.9% in 2010 to 44.2% in
2018, whereas use of private firms decreased from 26.2% to 21.7%. In contrast,
inter-municipal cooperation and use of municipality-owned firms increased from,
respectively, 5.4% and 6.5% in 2010 to 21.0% and 13.2% in 2018. These changes
are in line with Gradus et al. (forthcoming), who analysed shifts in the delivery
mode of 12 municipal services between 2010 and 2018 for 20 Dutch municipalities.
In the Netherlands, local government is considered the most important and
visible level of sub-national government. It has a relatively autonomous position
and can initiate local policies that it considers important for the local community.
In 2018, municipalities had a budget of about 7% of gross domestic product
(GDP) and 20% of government spending (Gradus et al., forthcoming). The serv-
ices of Dutch local government can be divided into several domains. Besides the
social domain (which we exclude due to lack of data for 2010), the physical
domain, with services such as the maintenance of roads/green spaces and garbage
collection, is important.
Furthermore, municipalities have considerable autonomy concerning how they
organize the back office of their local service provision. When analysing the
changes in patterns of service delivery modes, we therefore distinguish between
services from the physical and the operational (i.e. administrative and supportive)
domain. Interestingly, there are some differences between these domains (see
Figure 1). In both domains, consistent with the overall changes, in-house produc-
tion decreased between 2010 and 2018, whereas inter-municipal cooperation and
use of municipality-owned firms increased (it should be noted, however, that inter-
municipal cooperation increased much more in the operational domain). However,
whereas use of private firms increased slightly in the physical domain, it decreased
substantially in the operational domain. Figure 1 shows the changes in service
delivery modes between 2010 and 2018, for all services combined and separately
for the physical and the operational domain.
When we look at the changes for the 11 services separately, we see that for most
services, the pattern in 2010 is different from 2018. For parking management,
catering and cafeteria, there is no significant difference (based on Chi-square
tests). Cafeteria is the only service where in-house production increased. For all
services, inter-municipal cooperation has become more important but there are
large differences between the services. Remarkably, for asset valuation, the differ-
ence is almost 38%, suggesting the existence of large-scale effects that have become
more important over time (cf. Niaounakis and Blank, 2017). There is also a large
increase in inter-municipal cooperation for ICT. The pattern for the physical
Schoute et al. 5

domain is caused by the increased use of private firms for three of these services,
namely, maintenance of roads, sports facilities and parking management. For
parking management, there are some indications that privatization lowers costs
(Blom-Hansen, 2003). Moreover, as they are more capital-intensive, these services
have relatively long-term contracts and are therefore more difficult to re-privatize.
In contrast, for cleaning, there is a large decrease in use of private firms. The
literature for the UK suggests a connection between lower quality and cost savings
of contracted-out cleaning services, and highlights the poor working conditions
provided by private contractors (Elkomy et al., 2019). The European Public
Service Union (EPSU, 2012) also suggests that cleaning contracts mature between
five and seven years, and there are relatively more opportunities to re-privatize.
5
Drivers of service delivery modes
In this section, we describe how we have measured the service, financial and polit-
ical characteristics, as well as the control variables, in our study, and present some
descriptive statistics.
Service characteristics
Similar to, for example, Brown and Potoski (2005), we are interested in two service
characteristics: asset specificity and measurement difficulty. From December 2013
to January 2014, we surveyed an expert panel of 30 municipal financial managers.
6
We provided these managers with an extensive definition of the two characteristics,
which we based on those used by Brown and Potoski (2005), and asked them to
rate each of the 11 services on a five-point Likert scale for both asset specificity
In-house Cooperaon Municipal Private
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
All services Physical domain Operaonal domain
Figure 1. Changes in patterns of service delivery modes between 2010 and 2018, per domain.
6International Review of Administrative Sciences 0(0)

(1 ¼very low; 5 ¼very high) and measurement difficulty (1 ¼very easy; 5 ¼very
difficult). We obtained 24 usable responses (80.0%). In December 2018, we repeat-
ed this survey and obtained 12 usable responses (40.0%). Table 1 (available at:
https://journals.sagepub.com/doi/suppl/10.1177/0020852320968906) reports the
(weighted) average service characteristic ratings for each service. Overall, there is
considerable dispersion on the average service characteristic ratings among the 11
services. For asset specificity, the scores vary between 1.47 (for cleaning) and 4.17
(for garbage collection), whereas for measurement difficulty, the scores vary
between 1.57 (for cafeteria) and 3.05 (for ICT). Similar to Schoute et al. (2018),
we expect that services involving (1) more asset specificity and (2) more measure-
ment difficulty are less likely to be contracted out to a private or a municipality-
owned firm.
Financial characteristics
We measure the financial position of the municipalities by taking the average of the
Z-score of three indicators: (1) the inverse of the solvency ratio (unreserved fund
balance scaled by total assets); (2) the net debt ratio (i.e. level of debt as opposed to
their own financial resources); and (3) the net debt ratio corrected for outstanding
loans. These indicators are part of a package of six indicators that municipalities
were obliged to publish in both their budgets and annual reports from 2017
onwards and that are meant to increase the possibilities for benchmarking these
entities. We selected those indicators for which we were able to calculate both the
2010 and 2017 figures. Similar to Schoute et al. (2018), we expect that services of
municipalities that have a better financial position are less likely to be contracted
out to a private firm.
Political characteristics
As political characteristics, we focus on the ideological (left–right) orientation of
the municipal council of the municipalities, and on their fragmentation. Data
about the number of seats in 2010 were collected from the ‘Gids
Gemeentebesturen’ (‘Guide Municipal Boards’) in 2012, and those about the
number of seats in 2018 from the ANP (the Dutch Press Agency). To measure
the ideological (left–right) orientation of the municipalities’ municipal councils, we
used the 2010 and 2017 (for 2018) Chapel Hill Expert Survey (CHES) data set
(available at: www.chesdata.eu), which provided us with ratings on a scale con-
cerning general party positioning, ranging from ‘extreme left’ to ‘extreme right’, for
all Dutch national political parties. For each municipality, we calculated the left–
right orientation of the municipal council by weighting the proportion of seats
from the different political parties that are part of the municipal council by these
Chapel Hill ratings. Council members from so-called independent local parties
were excluded from the calculations because they were not rated on this left–
right scale. We use the Laakso-Taagepera index (i.e. the inverse of the
Schoute et al. 7

Herfindahl index of the size of political parties) (cf. Gradus and Dijkgraaf, 2019),
which can be interpreted as the relative size of parties, to measure the fragmenta-
tion of the municipalities’ municipal council. Similar to Schoute et al. (2018), we
expect that services of municipalities of which the municipal council has a more
right-wing political orientation are more likely to be contracted out to a private
firm. Given mixed results in prior studies for fragmentation (e.g. Gradus and
Budding, 2020; Warner and Hefetz, 2002), we are unable to specify a sign for
our expectation concerning political fragmentation.
Control variables
When estimating our model, we control for the following socio-economic charac-
teristics: number of inhabitants, population density, number of people with unem-
ployment benefits (per 1000 inhabitants) and average income per household (cf.
Schoute et al., 2018). The data for these variables were obtained from Statistics
Netherlands. For the number of inhabitants and population density, we calculated
the natural log in order to improve their distribution.
Descriptive statistics
Table 2 (available at: https://journals.sagepub.com/doi/suppl/10.1177/
0020852320968906) shows the descriptive statistics for the independent variables,
both in total and per institutional form, where we present the average scores for
2010 and 2018 combined, as well as for both years separately. As observed in Table
2, the average scores for asset specificity and measurement difficulty are almost the
same in both years. The average score for asset specificity is 2.52, which indicates
that this variable scores between ‘low’ and ‘average’. As the score for measurement
difficulty is somewhat lower (2.17), this implicates that the average score for this
variable is just above ‘easy’.
It should be noted that the financial position is an inverse composite variable of
three underlying indexes. As the average score declined from 0.09 in 2010 to –0.01
in 2018, this indicates that the average financial position of the municipalities in
our sample was stronger in 2018. For the political variables left–right orientation
and fragmentation of the municipal council, we observe that the average municipal
council in a Dutch municipality became more right-wing and more fragmented
between 2010 and 2018. Especially due to municipal mergers, the number of
inhabitants and population density are somewhat higher in 2018 than in 2010.
We observe that the number of people with unemployment benefits increased
rather substantially between 2010 and 2018. Also, the average income per house-
hold increased. It should be noted that the unconditional means per institutional
form show no clear pattern, in that all forms score highest on at least one variable
and lowest on another. In addition, for all but three of these variables, both the
ANOVA and Welch test show that the differences in unconditional mean scores
among the four institutional forms are significant.
8International Review of Administrative Sciences 0(0)

Model estimation results
We analyse the relationships between the service, financial and political character-
istics and municipalities’ choices of the four service delivery modes by estimating a
multinomial logit model (MNLM), with standard errors clustered by municipality
(cf. Schoute et al., 2018). As they are relatively easy to interpret, the estimates of
the marginal effects for the overall model (with all services included), the physical
domain model and the operational domain model are presented in Table 3 (avail-
able at: https://journals.sagepub.com/doi/suppl/10.1177/0020852320968906).
7
Service characteristics
Based on the argument that if the asset specificity of services is high, it is more
difficult to use those assets for other services (cf. Brown and Potoski, 2005), we
expect that services involving more asset specificity are less likely to be contracted
out to a private or municipality-owned firm. The marginal effects for the overall
model only support these expectations for private firms in 2010. The effect for
municipality-owned firms is contrary to our expectations but could be explained by
the relatively close relationship between such firms and their municipality owners
(cf. Schoute et al., 2018). The effects also indicate that an increase in asset specif-
icity decreases the probability of in-house production and increases the probability
of inter-municipal cooperation. However, while we observe clear differences
between the two domains, within the domains the effects are quite similar for
the two years. In the physical domain, asset specificity increases the probability
of inter-municipal cooperation and using municipality-owned firms, and decreases
the probability of in-house production. In contrast, in the operational domain,
asset specificity increases the probability of in-house production and decreases the
probability of the other three institutional forms, though the effect for
municipality-owned firms is not significant in 2010. Overall, in the physical
domain, asset specificity seems to be dealt with by collaboration (inter-municipal
cooperation or municipality-owned firms) thereby realizing economies of scale,
whereas in the operational domain, it is handled by in-house production.
Based on the argument that if it is more difficult to measure the outcomes
achieved and the activities performed, it is more difficult to assess the performance
of an external provider (cf. Brown and Potoski, 2005), we expect that services
involving more measurement difficulty are less likely to be contracted out to a
private or municipality-owned firm. The marginal effects for the overall model
support these expectations. In addition, these effects also indicate that an increase
in measurement difficulty increases the probability of in-house production, as well
as the probability of inter-municipal cooperation in 2018. However, we observe
clear differences between the two domains and within the domains also between
the two years. In the physical domain, measurement difficulty increases the prob-
ability of in-house production in both years; however, while it decreases the prob-
ability of using a private firm in 2010, it decreases the probability of
Schoute et al. 9

inter-municipal cooperation in 2018. In contrast, in the operational domain, mea-
surement difficulty increases the probability of inter-municipal cooperation and
decreases the probability of using a private firm in both years; however, while it
decreases the probability of using a municipality-owned firm in 2010, it decreases
the probability of in-house production in 2018.
Financial characteristics
We find no support for our expectation that services of municipalities that have a
better financial position are less likely to be contracted out to a private firm. In
fact, overall, financial position has surprisingly little influence in 2010 and only
some in 2018. The marginal effects for the overall model indicate that an increase
in financial position (which actually means that a municipality has more debt and
thus a weaker financial position) decreases the probability of inter-municipal coop-
eration in 2010, whereas it increases this probability (and decreases the probability
of in-house production) in 2018. Consistent with the overall model, an increase in
financial position (i.e. having more debt) increases the probability of inter-
municipal cooperation in both domains in 2018; however, whereas it decreases
the probability of using private firms in the physical domain, it decreases the
probability of in-house production in the operational domain. These results may
partly be due to that fact that the average financial position of the municipalities in
our sample was stronger in 2018 than in 2010.
Political characteristics
In earlier studies in the Dutch context, some indications have been found that left-
wing parties prefer in-house production and inter-municipal cooperation, whereas
right-wing parties have a preference for private firms (Gradus and Budding, 2020;
Schoute et al., 2018). In the overall model, though only in 2018, we do indeed find
that if a municipal council is more left-wing, the probability of in-house production
increases. For the operational domain, and in the same year, we observe the same
finding. For the physical domain, though for 2018 only, we find that if a municipal
council is more left-wing, the probability increases that the municipality performs
services in a municipality-owned firm. For 2010, and only for the physical domain,
we observe that if a municipal council is more left-wing, the probability increases
that inter-municipal cooperation is used, whereas the probability decreases that a
private firm is used. For the operational domain, we do not find any statistically
significant results for 2010. Overall, some weak evidence is found for an influence
of political characteristics, which is mainly in line with previous studies.
Largely, there are some indications that political fragmentation decreases the
ability to outsource. In the overall model for 2010, the marginal effect for in-house
production indicates that more fragmentation decreases the probability of inter-
municipal cooperation and increases the probability of using in-house production.
For the physical domain, we also find the latter result. Furthermore, we observe
10 International Review of Administrative Sciences 0(0)

for this domain that more fragmentation decreases the probability of using a
municipality-owned firm. For 2018, we find that more fragmentation decreases
the probability of using a municipality-owned firm in our overall model, as well
as for the operational domain. We do not find this, however, for the physical
domain. In sum, our results are more in line with Warner and Hefetz (2002)
than with Gradus and Budding (2020).
Conclusions
This study investigates the influence of service, political and financial character-
istics on municipalities’ choices of four service delivery modes (in-house, inter-
municipal cooperation, municipality-owned firm and private firm), both over
time and across domains. Based on data for 2010 and 2018, we find that inter-
municipal cooperation (and, to a lesser extent, use of municipality-owned firms)
increased significantly between these years, whereas in-house production and use
of private firms declined. In line with Schoute et al. (2018), our analysis suggests
that municipalities’ choices of service delivery modes are especially driven by ser-
vice characteristics. For both years and domains, we find significant results for our
asset specificity and measurement difficulty variables. However, whereas we
observe that the influence of these variables is generally the same for both years
in the overall model, we notice some remarkable differences between the two
investigated domains. More specifically, we find that the results for the physical
domain are mainly in line with the overall model, whereas we find some contra-
dictory results for the operational domain.
For financial characteristics, we do not find many significant results and those
we do find are only weak and generally not consistent over time and across
domains. However, interestingly, we find that when a municipality has more
debt, this decreased the probability that a municipality used inter-municipal coop-
eration in 2010, whereas it increased this probability in 2018. This indicates that
the financial position of municipalities plays a role in their service delivery mode
choices. Overall, the financial position of Dutch municipalities was considered
problematic in 2010 due to the global economic crisis, whereas it was much
better in 2018.
For the political characteristics, we especially find some interesting results for
political fragmentation. In line with Warner and Hefetz (2002), we find some
indications that political fragmentation decreases the ability to outsource to espe-
cially a municipality-owned firm. However, whereas we notice this effect in 2010
for the physical domain, in 2018, it is the operational domain in which we observe
this finding. For left–right orientation, we do not find many results, though we
observe some evidence that left-wing parties seem to prefer inter-municipal coop-
eration above other institutional forms and also have a preference for in-house
production, which is consistent with Gradus and Budding (2020).
There are some limitations and thereby also some avenues for future research
that we would like to mention. First, we did not explore all possible drivers of
Schoute et al. 11

service delivery modes. For example, we did not analyse the influence of proximity
of other municipalities, which may enhance the likelihood of finding municipalities
to partner with. Second, more attention should be paid to the social domain. In the
Netherlands, municipalities spend a considerable amount of their financial means
on this domain nowadays, especially as a result of a large-scale decentralization of
three governmental tasks in 2015. However, as this study uses data from 2010 and
2018, it was not possible to include this domain in this article. Third, although our
analyses show that the municipalities that responded to the two surveys are rep-
resentative for all Dutch municipalities in 2010 and 2018, given that the munici-
palities that responded to both surveys only partly overlap and due to municipal
mergers, the two independent samples may not be fully comparable. Finally, as
there are indications that it is not just the service, financial and political character-
istics of municipalities that play a role in service delivery mode choices, but also the
characteristics of key actors in the decision-making process (e.g. Albalate and Bel,
forthcoming), we suggest that more attention should be paid to these actors and
their characteristics in future studies.
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, author-
ship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication
of this article.
ORCID iDs
Martijn Schoute https://orcid.org/0000-0003-1799-4761
Tjerk Budding https://orcid.org/0000-0002-5343-7535
Notes
1. This article is part of a symposium on ‘Reverse privatization and re-municipalization of
local public services – Incidence, causes and prospects’, and we thank participants of this
symposium and referees for their comments.
2. Different from Schoute et al. (2018), we do not take governance characteristics into
account as data for these characteristics are unavailable for 2018.
3. The 2010 survey has also been used by Schoute et al. (2018), and the data concerning the
20 municipalities that responded to both surveys have also been used by Gradus et al.
(forthcoming). It should be noted that the total number of Dutch municipalities was
lower in 2018 than in 2010, which is due to municipal mergers.
4. A t-test for two independent samples shows no significant difference in size (measured as
the natural log of the number of inhabitants) between the respondents and the non-
respondents in 2010 (t(422) ¼–1.582, p¼0.114) or in 2018 (t(378) ¼–0.701, p¼0.484).
12 International Review of Administrative Sciences 0(0)

A one-sample Chi-square test shows no significant difference in regional representation
between the respondents and the survey population in 2010 (v
2
(11, 86) ¼5.89, p¼0.880)
or in 2018 (v
2
(11, 113) ¼11.00, p¼0.443).
5. It is harder to terminate a private contract prematurely because companies may demand
compensation.
6. We specifically approached these managers as they are supposed to have a broad over-
view of the municipal services and the motives behind contracting out decisions. These
managers all have a degree as Certified Public Controller or are studying to obtain this
degree, and most of them also have had prior academic education.
7. The results from the MNLM estimations are available upon request. The same applies
for the results from complementary two-period cross-section MNLM estimations, in
which we directly test (by including interactions with year dummies) the significance of
the differences between 2010 and 2018 in the relationships between the service, financial
and political characteristics and municipalities’ choices of the four service delivery modes.
The results of these latter estimations are consistent with those reported in this article.
Supplemental Material
Supplemental material for this article is available online at https://journals.sagepub.com/
doi/suppl/10.1177/0020852320968906.
References
Albalate D and Bel G (forthcoming) Politicians, bureaucrats and the public–private choice
in public service delivery: Anybody there pushing for remunipalisation. Journal of
Economic Policy Reform, epub ahead of print, DOI: 10.1080/17487870.2019.1685385.
Bel G and Costas A (2006) Do public sector reforms get rusty? An empirical analysis on
privatization of solid waste collection. Journal of Policy Reform 9(1): 1–24.
Bel G and Fageda X (2017) What have we learned from the last three decades of
empirical studies on factors driving empirical studies? Local Government Studies 43(4):
503–511.
Bel G, Fageda X and Warner ME (2010) Is private production of public services cheaper
than public production? A meta-regression analysis of solid waste and water services.
Journal of Policy Analysis and Management 29(3): 553–577.
Blom-Hansen J (2003) Is private delivery of public services really cheaper? Evidence from
public road maintenance in Denmark. Public Choice 115(3/4): 419–438.
Brown TL and Potoski M (2005) Transaction costs and contracting: The practitioner per-
spective. Public Performance and Management Review 28(3): 326–351.
Christoffersen H, Paldam M and Wu
¨rtz AH (2007) Public versus private production and
economies of scale. Public Choice 130(3/4): 311–328.
Clifton J, Warner ME, Gradus RHJM, et al. (forthcoming) Re-municipalization of public
services: Trend or hype? Journal of Economic Policy Reform, epub ahead of print, DOI:
10.1080/17487870.2019.1691344.
Demuth J, Friederiszick HW and Reinhold S (2018) Reverse privatization as a reaction to
the competitive environment: Evidence from solid waste collection in Germany. ESMT
Working Paper No. 18-02. Available at: https://papers.ssrn.com/sol3/papers.cfm?
abstract_id=3168551
Schoute et al. 13

Dijkgraaf E and Gradus RHJM (2007) Collusion in the Dutch waste market. Local
Government Studies 33(4): 573–588.
Dijkgraaf E and Gradus RHJM (2008) Institutional developments in the Dutch waste col-
lection market. Environment and Planning C: Government & Policy 26(1): 110–126.
Dijkgraaf E and Gradus RHJM (2013) Cost advantage cooperations larger than private
waste collectors. Applied Economics Letters 20(7): 702–705.
Domberger S, Hall C and Li EAL (1995) The determinants of price and quality in compet-
itively tendered contracts. Economic Journal 105(433): 1454–1470.
Elkomy S, Cookson G and Jones S (2019) Cheap and dirty: The effect of contracting out
cleaning on cost and quality in English hospitals. Public Administration Review 79(2):
193–202.
European Public Service Union (EPSU) (2012) Re-municipalising Municipal Services in
Europe. Brussels: EPSU. Available at: https://www.epsu.org/article/re-municipalising-
municipal-services-europe
Gradus RHJM and Budding GT (2020) Political and institutional explanations for increas-
ing re-municipalization. Urban Affairs Review 56(2): 538–564.
Gradus RHJM and Dijkgraaf E (2019) Poorer and less political fragmented Dutch munic-
ipalities take tighter waste reduction decisions. Waste Management 88(3): 328–336.
Gradus RHJM, Schoute M and Budding GT (forthcoming) Shifting modes of service deliv-
ery in Dutch local government. Journal of Economic Policy Reform, epub ahead of print,
DOI: 10.1080/17487870.2019.1630123.
Groot TLCM and Budding GT (2004) The influence of new public management practices
on product costing and service pricing decisions in Dutch municipalities. Financial
Accountability & Management 20(4): 421–443.
Hefetz A and Warner ME (2004) Privatization and its reverse: Explaining the dynamics of
the government contracting process. Journal of Public Administration Research and
Theory 14(2): 171–190.
Hefetz A and Warner ME (2007) Beyond the market vs. planning dichotomy:
Understanding privatisation and its reverse in US cities. Local Government Studies
33(4): 555–572.
Niaounakis T and Blank J (2017) Inter-municipal cooperation, economies of scale and cost
efficiency: An application of stochastic frontier analysis to Dutch municipal tax depart-
ments. Local Government Studies 43(4): 533–554.
Petersen OH, Hjelmar U and Vrangback K (2018) Is contracting out of public services still
the great panacea? A systematic review of studies on economic and quality effects from
2000 to 2014. Social Policy and Administration 52(1): 130–157.
Schoute M, Budding GT and Gradus RHJM (2018) Municipalities’ choices of service deliv-
ery modes: The influence of service, political, governance and financial characteristics.
International Public Management Journal 21(4): 502–532.
Tavares A (2017) Ten years after: Revisiting the determinants of the adoption of municipal
corporations for local service delivery. Local Government Studies 43(5): 697–706.
Voorn B, Van Genugten ML and Van Thiel S (2017) The efficiency and effectiveness of
municipally owned corporations: A systematic review. Local Government Studies 43(5):
820–841.
Warner ME and Aldag AM (forthcoming) Re-municipalization in the US: A pragmatic
response to contracting. Journal of Economic Policy Reform, epub ahead of print, DOI:
10.1080/17487870.2019.1646133.
14 International Review of Administrative Sciences 0(0)

Warner ME and Hefetz A (2002) Applying market solutions to public services: An assess-
ment of efficiency, equity, and voice. Urban Affairs Review 38(1): 70–89.
Martijn Schoute is Assistant Professor in the Department of Accounting at the
Vrije Universiteit Amsterdam, The Netherlands. His research focuses on a wide
variety of management accounting and public administration topics, and has been
published in journals such as Behavioral Research in Accounting,The British
Accounting Review,International Public Management Journal and Journal of
Management Accounting Research. For more information, see: https://research.
vu.nl/en/persons/martijn-schoute
Raymond Gradus is Professor of Public Economics and Administration at the
School of Business and Economics of the Vrije Universiteit Amsterdam, The
Netherlands. He is also a fellow of the Tinbergen Institute and Network for
Studies on Pensions, Aging and Retirement (Netspar), and Chairman of the
Committees for Financial Supervision of the Dutch Antilles. His research interests
are public administration, local government, environmental policy and social secu-
rity. He has published in journals such as International Public Management
Journal,Public Administration,Ecological Economics,Social Policy &
Administration and Oxford Economic Papers. For more information, see: https://
research.vu.nl/en/persons/raymond-gradus
Tjerk Budding is Programme Director of the postgraduate programme for Certified
Public Controller at the School of Business and Economics of the Vrije Universiteit
Amsterdam, The Netherlands. His research interests are public sector accounting,
outsourcing decisions and e-government. He is co-author of the textbook Public
Sector Accounting, and has published in journals such as Management Accounting
Research,International Public Management Journal and Government Information
Quarterly. For more information, see: https://research.vu.nl/en/persons/g-budding
Schoute et al. 15