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Contracting Out and the Fiscal Sustainability of Public Services
Abstract
This study explores how contracting out can contribute to the fiscal sustainability of public services. Together with the economic advantage that contracting out can lower production costs over government production in house, contracting theory informs that contracting out can offer an insulation of efficient and effective service production from the political incentive problem of the principal. Hypotheses from the perspective are tested over panel data on subnational public service facilities operated via user fees in South Korea. As hypothesized, the analysis results confirm a positive relationship of contracting out with net revenue over government production. While both regionally/municipally owned corporations (R/MOCs) and nonprofits demonstrate their capabilities as competent partners of a government, nonprofits are more effective at the generation of net revenue. The study discusses the implications of contracting out for publicness and a style of governance that actively utilizes the flexibility and expertise of organizations outside a government.
... It argues that there is no single universally correct level of agent discretion that can be prescribed to all contractual relationships but different levels of discretion exist that could work for different contractual relationships based on multiple factors characterizing each relationship. One such factor could be the institutional form of the contractor -public, nonprofit, or for-profit -because these forms signify different levels of the agency problem, a perspective inspired by government contracting research (Brown et al. 2006;Kim and Choi 2023) that argues the significance of contractor form on contractor behavior. According to this perspective, this study predicts that the government principal will show a greater willingness to grant discretion to a public/nonprofit contractor agent with less of an agency problem, and a decreased willingness to do so if the agent is a for-profit company with a greater agency problem. ...
... Both the government and the contractor agree to form a principal-agent relationship, seeing mutual gains (Moe 2005). Yet, the relationship could suffer from their own problems: the political incentive problem of the principal (Miller 2000;Kim and Choi 2023) and the agency problem. This study focuses on the agency problem (Hart and Holmström 1987;Jensen 1983a, 1983b;Shleifer and Vishny 1997, 740), referring to the possibility that the contractor agent might be distracted to its short-term interest inconsistent with the government principal's. ...
... The present study has sought a middle ground in the study of government contracting by drawing on both perspectives. First of all, the contractor agent really needs a good level of discretion and autonomy in order to concentrate on the delegated work that the agent has expertise in and not to be distracted by the short-term incentive of politicians (Weingast et al. 1981;Baqir 2002;Kim and Choi 2023). Politicians must be careful when they engage with the contractor agent; even a minor intervention with a benevolent intention might cause unintended consequences on the motivations of the contractor agent discouraging the agent's commitment to the delegated work. ...
Government contracting research emphasizes the significance of contractor form (public, private nonprofit, private for-profit) on contractor behavior, while agency theory addresses issues relating to how to manage agent discretion in a general principal-agent relation. Joining contractor form and agent discretion, this study explores how contractor form is associated with ways of managing the discretion of a contractor agent in a context of the operation of municipal correctional service facilities. Specifically, this study attempts to find out via a survey experiment how government chief executives differentiate for-profit contractors from other contractors in how acceptable they are as public service partner, how much discretion they could be allowed, and how much need exists to implement major contract management strategies to curb the agency problem. The analysis of the original data obtained from 104 municipalities in eleven western U.S. states shows that government chief executives understand the greater agency problem presented by the for-profit contractor and would permit the contractor agent less discretion and take tighter implementation of contract management strategies. Implications of the findings for research on government contracting and public administration are discussed.
... It underscores the importance of aligning data practices with public expectations to maintain trust and ethical integrity. Kim and Choi (2023) conduct an empirical analysis of the relationship between government trust and public perception, particularly in the context of contracting out public services. Their study demonstrates that effective contracting out between public and private organizations is greatly enhanced by strong trust and collaboration among key stakeholders, including the government, private companies, and civil society organizations. ...
In an era where data profoundly influences decision-making across various sectors, this comprehensive review critically examines the evolving landscape of data science ethics, particularly focusing on the interplay between technological advancements and ethical standards. The study aims to investigate and synthesize current ethical practices and challenges in modern data collection and analysis, tracing the evolution of ethical standards in data science, understanding the significance of ethical considerations in contemporary data practices, and exploring the development of global regulatory and ethical frameworks. The paper encompasses a systematic literature review, focusing on core ethical principles in data collection and analytical processes, the roles of consent and privacy, the complexities introduced by big data, and the intricacies of ethical frameworks across different regions. It bridges the research gap in data ethics by providing insights into practical ethical frameworks and instructional models, guiding researchers, policymakers, and practitioners in ethical data handling. The study concludes that ethical considerations are integral to data science practices and contribute significantly to societal well-being. It recommends enhanced ethical education in data science, development of inclusive ethical frameworks, strengthening regulatory oversight, and promoting public engagement in data ethics discussions. These steps are essential for ensuring responsible and beneficial use of data in an ethically complex landscape. Keywords: Data Ethics, Data Science, Ethical Standards, Privacy, Consent, Regulatory.
... Accounting for the factors that explain variation in the number of SEOs observed across jurisdictions (e.g., Feiock & Jang, 2009;Woo & Jung, 2022b), and why some local governments are more successful in engendering a greater number of SEOs, remain underexplored areas of research (Russo et al., 2022). The decision to enter partnerships with SEOs has often been attributed to budgetary constraints and/or cost-efficiency considerations, such that a local government will enter a partnership if it is more cost-efficient to externalize a service than produce it internally (e.g., Brown & Potoski, 2003;Choi & Park, 2021;Kim & Choi, 2023;Stein, 1993). Yet, Choi and Park (2021), Brown and Potoski (2003), and Jansson et al. (2021) noted the limitations of relying on cost-efficiency as a variable exclusively and proposed investigating institutional catalysts. ...
This study seeks to explain government growth from a tri-sector perspective. Specifically, it examines how the for-profit and nonprofit sectors impact government growth. Market failure theory predicts an inverse relationship between for-profit sector size and government size. Theories of government failure and nonprofit advantage also predict an inverse size relationship between the nonprofit sector and government. Analysis of panel data from Idaho localities, 1996–2014, confirms the inverse relationship between for-profit sector size and government size, and that between nonprofit sector size and government size, as expected by theory. This study contributes to the literature on public administration, governance, and nonprofit and government relations by demonstrating the relevance of the tri-sector perspective on government growth and the active role of nonprofits in relation to government.
Evidence for the fundamental presumption that municipal structure matters for government performance is smaller and weaker than many might expect. This research contributes evidence to the literature by focusing on how municipal structure affects government fiscal performance. Municipal structure is operationalized by constructing an index on a political‐administrative scale based on seven essential structural characteristics. As the index score increases, the municipal structure becomes less political and more administrative or professional. Theoretically, municipal structure can affect government performance by influencing managerial professionalism, managerial strategy stance, and the relative attention of government officials to managerial accountability and efficiency. The empirical evidence shows that municipalities adopting a structure with an imbalance toward administrative characteristics are more likely to achieve the best fiscal conditions in cash solvency, dependence on intergovernmental revenues, and outstanding debt level. Moreover, municipal structure moderates the influence of external environmental factors on government fiscal conditions.
Public–private partnerships (PPPs) are a popular way to form synergies between public and private partners in order to overcome modern challenges and develop new opportunities. However, recent research suggests that PPPs entail more risks than other projects. In this systematic literature review, we analyze 159 articles published in international journals and identify eight major risk factors in PPPs. We integrate our results into a risk management framework and examine how the risk factors potentially impact PPPs before summarizing risk mitigation strategies. Our findings offer a cross-sectoral perspective and bridge the gap between research and practical implementation. By developing a novel conceptual model we advance the understanding of risks in PPPs and contribute to the theoretical foundations.
In this paper, we discuss the state of the art on the creation of arm’s length bodies (ALBs) by local governments. We make three main contributions. First, there are many different types of ALBs and each country has its own categories; an expert survey was held identifying three common types of body, to enable future comparative research. Second, we point out that the creation of ALBs has led to a number of new challenges for local governments, particularly regarding governing bodies at arm’s length to ensure ALBs’ good performance. A lack of capacity and information have to be countered, for example, by increased monitoring – also for democratic accountability purposes. Special attention is needed for the multiple principal problem that arises when local governments jointly create ALBs. Third, research into local ALBs is still in its early stages. We present a research agenda to develop knowledge on the topic.
The market-inspired reforms of New Public Management have been particularly pronounced in Swedish local government. Notably, municipally owned enterprises (MOEs) have rapidly grown in numbers. Principal-agent theory gives rise to the hypothesis that the massive introduction of MOEs has impacted negatively on the conditions for accountability in Swedish local government. To study this, social network analysis was employed in mapping networks for 223 MOEs in 11 strategically chosen municipalities, covering a total of 732 politicians. The analysis reveals substantial overlaps between principals (representatives of the ultimate stakeholders, citizens) and agents (the boards of the MOEs). Hence, corporatization of public services seems to imply worrisome entanglements between the politicians who are set to steer, govern, and oversee MOEs on the one hand, and the board members of MOEs on the other. The increasing numbers of MOEs may therefore have adverse effects on accountability in important and growing parts of Swedish local government.
Municipally owned corporations (MOCs) are increasingly utilised to provide local public services, but little remains known about their efficiency and effectiveness. In this article, we offer a typology of MOCs, explore the variables that affect their behaviour, and perform a systematic review of public administration articles published between 2001 and 2015 on their efficiency and effectiveness. We find that MOCs are often more efficient than local bureaucracies in the provision of services such as refuse collection, water distribution, and transit services, although they also have high initial failure rates. We conclude that municipally owned corporations are a viable means for delivering some local public services for localities capable of initiating and managing complex contracts. In light of the scarcity of literature on this topic, our conclusions remain tentative, and we encourage additional research into this growing phenomenon.
This study investigates the influence of service, political, governance and financial characteristics on municipalities’ choices of four service delivery modes (in-house, inter-municipal cooperation, municipality-owned firm and private firm) in the Dutch local government setting. The results show that as a service involves more asset specificity and more measurement difficulty, the likelihood that municipalities contract this service out is lower. Also, although some differences in preferences are found between boards of aldermen and municipal councils, for both political bodies a more right-wing political orientation is shown to be positively related to privatization of services. Furthermore, contracting out is also shown to be related to the governance model of municipalities, as services of municipalities that (in general) put relatively less emphasis on input, process and output performance indicators, and more on outcome performance indicators, are more likely to be privatized. Finally, the results also show that services of municipalities that have a better financial position are less likely to be contracted out to a private firm.
With the increase in public services offered at the local level and heightened budgetary and financial constraints on local government, new ways of managing local public services must be sought, in order to maximize the efficiency of resource management. Accordingly, local governments have introduced organizational changes, through contracting out, the creation of public agencies, and increased cooperation with other municipalities and private companies. However, previous studies have only examined the relationship between contracting out and efficiency, and no in-depth survey has been made of the relationship between efficiency with other forms of management, nor of the joint impact of these forms of management on efficiency. The main aim of this study is to determine whether New Public Management (NPM) delivery forms do in fact improve the efficiency of Spanish local governments. In this regard, we analyze the particular impact of the global recession. Our results suggest that in general terms the creation of agencies, contracting out, and intermunicipal cooperation reduce cost efficiency. However, these results also lead to the conclusion that during the global recession, some of these NPM delivery forms tended to become more efficient. Thus, empirical evidence suggests that the adoption of mixed firms contributes to higher levels of cost efficiency in the whole period considered, and thus it may be a suitable instrument in periods of crisis.
Performance-based contracting (PBC) is becoming increasingly attractive to public human service agencies. By linking contract
compensation to contractors’ performance, PBC is expected to foster quality services, to improve outcomes, and to reduce government
monitoring. However, empirical evidence on the effectiveness of PBC remains both limited and mixed. Based on a case study
of the Indiana vocational rehabilitation program, this article employs a quasi-experimental design to evaluate the effectiveness
of PBC for individual employment outcomes over the 2004–09 period, with the Michigan vocational rehabilitation program as
a control. Using propensity score matching and difference-in-differences regressions to control for the imbalances between
the two states, this article finds that PBC significantly improves employment results and reduces time to employment, two
measured performance indicators. However, the impact of PBC on unmeasured employment quality, as indicated by working hours
and wages, is trivial. This article further suggests relational contracting as a supplemental mechanism for PBC in human service
provision.
This paper extends the Mundlak approach to the spatial Durbin panel data model (SDM) to help the applied researcher to determine the adequacy of the random effects specification in this setup. We propose a likelihood ratio (LR) test that assesses the significance of the correlation between regressors and individual effects. By contrast to the Hausman test, the Mundlak approach identifies (to some extent) the regressors correlated with individual effects. The second advantage is that once the correlation with individual effects has been modelled through an auxiliary regression, the random effects specification provides consistent estimators and the effect of time-constant variables can be estimated. Some Monte Carlo simulations study the properties of this proposed LR test in small samples and show that in some cases, it has a better behaviour than the Hausman test. We finally illustrate the usefulness of the extended Mundlak approach by estimating a house price model where some of the price determinants are time-constant. We show that ignoring the endogeneity of regressors with respect to individual effects leads to unreliable estimated parameters while results obtained using the Mundlak approach and the fixed effects specification are similar (concerning time-varying variables), implying that correlation between regressors and individual effects is well captured.
This article challenges Fixed Effects (FE) modeling as the ‘default’ for time-series-cross-sectional and panel data. Understanding different within and between effects is crucial when choosing modeling strategies. The downside of Random Effects (RE) modeling— correlated lower-level covariates and higher-level residuals—is omitted-variable bias, solvable with Mundlak’s (1978a) formulation. Consequently, RE can provide everything that FE promises and more, as confirmed by Monte-Carlo simulations, which additionally show problems with Pluemper and Troeger’s FE Vector Decomposition method when data are unbalanced. As well as incorporating time-invariant variables, RE models are readily extendable, with random coefficients, cross-level interactions and complex variance functions. In the appendix, an empirical example shows that disregarding these extensions can produce misleading results. We argue not simply for technical solutions to endogeneity, but for the substantive importance of context/heterogeneity, modeled using RE. The implications extend beyond political science to all multilevel datasets. However, omitted variables could still bias estimated higher-level variable effects; as with any model, care is required in interpretation.
See also subsequent publication https://www.researchgate.net/publication/299604336_Fixed_and_Random_effects_models_making_an_informed_choice
During the last few years, the local government sector in European countries has undergone a number of important changes. Among the various reform initiatives has been the externalization of public services, such as corporatization, contracting-out, public-private partnerships and privatization. The key goal of this article is to describe and explain the evolution of local public services provision in the two selected countries, with a particular focus on 'corporatization'. The article seeks to draw a picture of the actual municipal landscape with the administrative core and its various corporations. Furthermore, it will discuss the reasons for corporatization trends and their impact on the corporate governance structures of municipalities in Germany and Italy.
The article studies the evolution of the constitutional arrangements in seventeenth-century England following the Glorious Revolution of 1688. It focuses on the relationship between institutions and the behavior of the government and interprets the institutional changes on the basis of the goals of the winners—secure property rights, protection of their wealth, and the elimination of confiscatory government. We argue that the new institutions allowed the government to commit credibly to upholding property rights. Their success was remarkable, as the evidence from capital markets shows.
Aligning the interests of local governments with market development is an important issue for developing and transition economies. Using a panel data set from China, we investigate the relationship between provincial government's fiscal incentives and provincial market development. We report three empirical findings. First, we find that during the period of “fiscal contracting system” the discrepancy between ex ante contracts and ex post implementation was relatively small, suggesting that the fiscal contracts were credible. Second, we find a much higher correlation, about four times, between the provincial government's budgetary revenue and its expenditure during 1980s and 1990s as compared to 1970s, demonstrating that provincial governments faced much stronger ex post fiscal incentives after reform. Third, we find that stronger ex ante fiscal incentives, measured by the contractual marginal retention rate of the provincial government in its budgetary revenue, are associated with faster development of the non-state sector as well as more reforms in the state sector in the provincial economy. This holds even when we control for the conventional measure of fiscal decentralization. Finally, we compare federalism, Chinese style, to federalism, Russian style.
This study aims to investigate how local governments strategically respond to fiscal controls imposed by state governments. Specifically, we explore the effects of state fiscal preemptions on the way local governments deliver public services—that is, contracting out. Using negative binomial regressions, we found that state fiscal preemptions increase the tendency of local governments to contract out public services. However, the dynamics of contracting out depend on the local government’s current municipal fiscal status and the type of service provider. When local governments perceive a high level of fiscal stress, they tend to take a passive stance to contracting out. Moreover, the relationship between fiscal preemptions and contracting out varies contingent on the type of service provider. In sum, the findings suggest that local governments actively respond to institutional limitations on municipal fiscal activities in order to overcome supply and demand challenges, although the choice of service delivery method varies depending on fiscal conditions and the type of service provider.
Governments around the world frequently procure complex products, such as large transport projects (LTPs), from markets. This process can be regarded as a kind of complex public contracting (CPC) requiring a cross-boundary collaboration between public buyers and different market vendors. Nevertheless, scholars have yet to discover how to sustain the performance of these CPCs. Based on the survey data on LTPs in China, this study explores the varied effects of three CPC elements (namely, public agency involvement, specific contractual design, and relational management) on contracting performance using structural equation modeling. The results show that both specific contractual design and relational management directly contribute to contracting performance, whereas joint action mediates these relationships. Moreover, public agency involvement cannot contribute to contracting performance directly except through the mediation of joint action.
Little scholarly research has paid attention to the collective impact of contracting out on local financial condition. Contracting out can enhance a fiscal state by allowing local officials for more buying power with lower service costs as well as less long-term liabilities. Beyond prior research on the effect of contracting in a service, this research offers evidence that higher levels of contracting out spending improve local financial condition regarding budget solvency and long-run solvency. However, external suppliers can deteriorate financial condition. The findings show that the improvement of budget solvency does not materialize at a certain level of contracting out spending, but this is not the case for long-run solvency. The expectation of financial condition improvement may rely on the degree to which practitioners deliver public services through contracting out. Thus, local officials may want to decide levels of contracting out services strategically.
The 2007–2008 Global Financial Crisis renewed interest in New Public Management tools. Privatization and intermunicipal cooperation are the two most common forms of service delivery reforms among US local governments. Which is more responsive to fiscal stress, service needs and political interests? Our national survey of 2,109 US local governments in 2017 finds cooperation is more responsive to fiscal stress and community need, while privatization is more common in communities with higher home values. Unionization is associated with more privatization and less cooperation. US local governments balance fiscal stress and community need. Cooperation is the preferred service delivery alternative.
Contracting for prison services has been a topic of discussion for decades. Absent from this discussion is the relationship between contracting for immigration detention and confinement quality, a topic that has gained relevance as the detained immigrant population recently surpassed 440,000 per year. Detaining immigrants presents unique challenges because of detainee characteristics, the performance standards governing facilities, and the intersectoral and intergovernmental arrangements used to manage detention facilities. This research conducts the first‐known large‐N study that evaluates the confinement quality of U.S. Immigration and Customs Enforcement's detention facilities to determine the effect, if any, of contracting on performance. The findings suggest that all detention facilities have deficiencies that threaten the well‐being of detained immigrants, but, broadly, privately contracted detention facility environments are less safe and secure than their public counterparts. The authors use contracting theory to explain why this performance disparity might exist and conclude with a discussion of the practical implications of this research.
Cities continue to face fiscal challenges after the Great Recession and alternative service delivery is being emphasised as a solution. How promising is alternative service delivery as a solution and what are its barriers? Regression analyses using 2012 survey data of US local governments show that local governments manage procedural barriers, but structural barriers of economy and demography hinder privatisation and cooperation. Places with a housing bust (measured as decline in home values) can use privatisation, but not places with more or increased poverty. Cooperation is more promising for places with increased poverty, but lack of a willing partner hinders this spatially constrained tool. Neither cooperation nor privatisation is promising for places with low home values. State governments must level the playing field for localities with weak economies if market approaches to service delivery are the main tools for local governments to survive fiscal stress.
The determinants of outsourcing in local government are widely studied from a variety of frameworks. One concept consistently used to explain local government outsourcing is fiscal condition, with many noting that outsourcing is more likely when a local government’s fiscal condition declines into fiscal stress. Despite the ubiquity of this expectation in the outsourcing literature, several articles reviewed suggest that the findings for this relationship remain uncertain. As a result, the research presented in this article sought to examine and extend what is known about the relationship between fiscal stress and outsourcing in U.S. municipalities. The research includes previous measures of fiscal stress and adds new measures. In addition, it tries to overcome the limited theoretical testing of the relationship between fiscal stress and outsourcing by examining both direct and indirect effects of fiscal stress on outsourcing. It finds that municipalities in the United States that are experiencing fiscal stress are more likely to engage in outsourcing, particularly municipalities that are experiencing fiscal stress and have a positive evaluation of the external market to provide services.
This book provides a general, nontechnical introduction to core ideas in positive political theory as they apply to public management and policy. Anthony Michael Bertelli helps readers understand public-sector governance arrangements and their implications for public management practice policy outcomes. By offering a framework that applies to specific administrative tasks, The Political Economy of Public Sector Governance allows readers to think clearly about many aspects of the modern administrative state and how they fit into a larger project of governance.
Andreas Ortmann and Mark Schlesinger, in their article “Trust, Repute, and the Role of Nonprofit Enterprise,” examine what they term “the trust hypothesis,” namely “the claim that asymmetric information in the markets for certain goods and services can explain the existence of nonprofit enterprise in those markets” (this volume). There is much that is sensible in what they say, and they have performed a valuable service in pulling together some of the more recent empirical literature on asymmetric information in markets heavily populated with nonprofit firms. I have some concerns, however, both with respect to the authors’ formulation of the trust hypothesis and with their approach to its verification.
This study aims to uncover the different effects of economic recessions on city contracting, which vary with institutional characteristics. Drawing on the literatures of public finance and management, it is hypothesized that recessions have a positive relationship with contracting and this relationship will be stronger in governments with the council–manager form or the charter status than in those with the mayor–council form or the general-law status, respectively. The hypotheses are tested on all available California cities over 17 years, from 1993 to 2009. Interestingly, the results indicate that recessions actually decrease contracting in governments with both the mayor–council form and the general-law status, but the extent of the decrease is moderated if they adopt either the council–manager form or the charter status. For cities with these two institutional characteristics, finally, it turns out that recessions increase contracting. These uneven effects of recessions imply that governments experience environmental shock very differently one from another because they differ in institutional characteristics.
Empirical analyses in social science frequently confront quantitative data that are clustered or grouped. To account for group-level variation and improve model fit, researchers will commonly specify either a fixed- or random-effects model. But current advice on which approach should be preferred, and under what conditions, remains vague and sometimes contradictory. This study performs a series of Monte Carlo simulations to evaluate the total error due to bias and variance in the inferences of each model, for typical sizes and types of datasets encountered in applied research. The results offer a typology of dataset characteristics to help researchers choose a preferred model.
The state has, since its origins, been characterized both by the production of public goods and a competition for the surplus benefits generated by the creation of those goods. Holmstrom's (1982) analysis of an impossibility result leads to the conclusion that this problem is logically inescapable. There is no process for exactly allocating the benefits of an interdependent social process that eliminates moral hazard. Furthermore, morally hazardous behavior can undermine the efficiency of the processes that generate the benefits. In both firms and states, therefore, the credible constraint of morally hazardous behavior is a fundamental concern. In both forms of social organization, delegation to bureaucracy can enhance efficiency by creating barriers between those actors with moral hazard and the producers of the benefits. The characteristics of Weberian bureaucracy, including rational/legal constraints and autonomous professional norms, serve to insulate bureaucrats from efficiency-undermining political pressures. This perspective provides support for concerns of the century-old Progressive reform tradition, which wanted to place bureaucrats "above politics" - and stands in contrast to the more recent principal/agency perspective, which argues that the fundamental problem is the creation of incentive systems that make bureaucratic subordinates increasingly responsive to the preferences of political superiors.
Panel data analysis has become a popular tool for researchers in public policy and public administration. Combining information from both spatial and temporal dimensions, panel data allow researchers to use repeated observations of the same units (e.g., government agencies, public organizations, public managers, etc.), and could increase both quantity and quality of the empirical information. Nonetheless, practices of choosing different panel model specifications are not always guided by substantive considerations. Using a state-level panel data set related to public health administration as an example, I compare four categories of panel model specifications: (1) the fixed effects model, (2) the random effects model, (3) the random coefficients (heterogeneous parameter) model, and (4) linear dynamic models. I provide an overview of the substantive consideration relevant to different statistical specifications. Furthermore, I compare estimation results and discuss how these different model choices may lead to different substantive interpretations. Based on model comparisons, I demonstrate several potential problems of different panel models. I conclude with a discussion on how to choose among different models based on substantive and theoretical considerations.
This study explores the determinants of structural changes and continuities of public sector organizations in Korea using longitudinal data. Focusing on the political costs of termination, we examine external and internal factors that are closely linked to the political incentives to terminate quangos. This article primarily addresses the following question: What determines the termination of public sector organizations? The model suggests that survivability of public sector organizations largely depends on external factors such as political, institutional, and social changes. Specifically, quangos are more likely to be terminated during political turnovers and the period when presidential power is maximized. Termination seems easier for politicians when social demands are mature enough to blow away political burdens and cynicism. Although organizations with fewer resources are more vulnerable to external pressures and shocks, none of the quango-specific factors significantly affect the survivability of Korean quangos.
The ascendancy in the United States of new governance reforms (NGRs) poses fundamental challenges and opportunities for public
administrationists. The argument in this article is threefold. First, the fundamentals driving these reforms as the twentieth
century ends appear enduring and paradoxical in creating a neoadministrative state. Second, because it is more consonant with
America's exceptionalist values, the neoadministrative state affords an opportunity to develop the normative theory of public
bureaucracy that has eluded public administration for so long because of its explicit and implicit penchant for Hamiltonian
rather than Madisonian prescriptions for reform. Finally, and partially to advance the resiliency of that normative theory,
I will argue that a polity-centered theory of administrative reform is needed. Adapted from the work of scholars studying
comparative state building from a neoinstitutionalist perspective, such a theory can help public administrationists play a
distinctive role in both understanding and informing the evolution of the neoadministrative state. A polity-centered theory
also can help reframe debates in terms of the ways that NGR reforms affect the relationship between society and the state
and away from purely managerialist considerations.
The determinants and consequences of contracting are examined in more than 1,000 Texas school districts for 1997—2008. The results largely replicate prior research by O'Toole and Meier, showing that contracting is negatively related to spending on school districts' core instructional functions and that the relationship between contracting and bureaucracy is reciprocal. The present findings, based on data from a longer period, indicate that contracting is positively related to school district performance. This article also finds support for an extended model of contracting determinants involving two environmental shocks: negative budget shocks and enrollment shocks.
This study identifies the determinants of appointment of executives in quangos. Using data from 85 quangos in Korea over 15 years between 1993 and 2007, we investigate the degree to which various characteristics of organizational actors affect the choice of executives. Three organizational actors include presidents, sponsoring government departments, and the concerned quangos. Although results vary by executive position, the findings of the empirical analysis with multinomial probit and generalized linear mixed models support the idea that the appointment of quango executives is not the result of presidential choice but that of the interactions among the key organizational actors, with different incentives and resources, on the appointment. Compared to former bureaucrats, presidential allies are more likely to be appointed when presidents have more political support from the National Assembly and it is easier for insiders to be promoted as executives from larger and older quangos with clear legal origins.
Strategic planning has the potential to enable cities to weather the effects of fiscal crises. City officials can use the information gathered though internal and external scanning to implement fiscal policy changes that can minimize their governments’ exposure to external fiscal shocks, and to experiment with alternative service delivery arrangements that generate cost-savings. Linking strategic plans to budgets allows cities to focus on core services, and reduce expenditures for non-essential programs. Strategic plans can also provide a framework for operations, facilitating closer cooperation and coordination among managers and workers in preventing the further deterioration in the fiscal condition of their organization. Can cities that implement comprehensive strategic planning adjust better to the current fiscal crisis and minimize their budget deficits? The results of advanced econometric analysis are inconclusive. Adjusting for selection bias and endogeneity, strategic planning is associated with the perception of improving city government fiscal health. Planning, however, has no effect on actual deficits.
In this article, the author builds a model of local governments' decisions to contract out residential solid waste disposal services and empirically tests this model by using a new dependent variable—proportion of expenditures on a service that goes to expenses other than payroll. The important factors affecting the contracting-out decision are scale economies, nonproperty taxes, difference in private- and public-sector unionization rates, and income and bond rating, in that order. Political and ideological factors appear to be less determinative than economic considerations.
Public administration writers, with some notable exceptions, generally have not paid a great deal of attention to the history of ideas. However, public administration inquiry is profoundly affected by longstanding political and social ideas. This article shows how the idea of the state as a purposive association-that is to say, a collective enterprise that is driven by some set of substantive ends or purposes-has helped to shape the thinking and discourse of some public administration writers, particularly those of the reinventing government movement. The implications of this for public administration inquiry and education are examined.
The concept of the budget constraint, previously applied mainly to household decisions, was extended to enterprises and other organizations initially by Kornai for socialist economies. The more general phenomenon usually includes rent seeking, although not all rent-seeking behavior is associated with a soft budget constraint (SBC). Rather, SBC analysis is a theory of exit, or more precisely, of the demise of organizations. Moreover, the syndrome cannot be treated as a special case of the theory of regulation because not all price regulation softens the budget constraint. The SBC can emerge in nonregulated spheres, especially when financial interactions take place in vertical relationships between superiors and subordinates rather than in horizontal market conditions.J. Comp. Econom.,March 1998, 26(1), pp. 11–17. Littauer Center, Harvard University, Cambridge, Massachusetts 02138, and Collegium Budapest, Budapest, Hungary.
Privatization has been on the political agenda for the last two decades. The literature points to two major explanations of privatization. One explanation is political-ideological, considering privatization to be a Liberal-Conservative strategy. Economic crisis or fiscal stress is the other main explanation of privatization. The two theses are investigated by evaluating the determinants of contracting out in Danish local governments. The analysis shows that fiscal stress is strongly, but inversely related to contracting out, while Liberal-Conservative political leadership is not associated with higher levels of contracting out than Social Democratic governance. Thus, the richer a local government becomes, the more it contracts out. Although party politics is not decisive for contracting out, the motivation seems to be political rather than economical. Specifically, it is argued that in a strongly decentralized public sector with influential public employees, contracting out is possible in good times when revenue and public expenditure are easier to increase, which reduces public employee resistance to contracting out.
The research presented here adopts an organizational approach to develop three regression models that examine why local governments accumulate slack in the form of unreserved fund balances, and what is the impact of slack resources on local governments' short-term fiscal conditions and decisions about spending and revenues. Using data on Chicago suburban municipalities and their governments, the first model estimates the effects of long-term and short-term conditions (fiscal and governing) on unreserved fund balances. The second and third models examine the impact of slack resources and other factors on year-end deficits or surpluses and changes in spending and own-source revenues. The results show that ending balances, expenditures (size), and long-term fiscal conditions have the greatest effect on fund balances, and that slack and current fiscal conditions have the greatest effect on ending balances and changes in revenues and spending.
Local government restructuring should no longer be viewed as a simple dichotomy between private and public provision. A 1997 survey of chief elected township and county officials in New York shows that local governments use both private and public sector mechanisms to structure the market, create competition, and attain economies of scale. In addition to privatization and inter-municipal cooperation, two alternative forms of service delivery not previously researched-reverse privatization and governmental entrepreneurship-are analyzed here. Logistic regression on the 201 responding governments differentiates the decision to restructure from the level and complexity of restructuring. Results confirm that local governments are guided primarily by pragmatic concerns with information, monitoring, and service quality. Political factors are not significant in the restructuring process and unionization is only significant in cases of simple restructuring (privatization or cooperation used alone). Fiscal stress is not a primary motivator, but debt limits are associated with more complex forms of restructuring. Restructuring service delivery requires capacity to take risks and is more common among experienced local officials in larger, higher-income communities. Restructuring should be viewed as a complex, pragmatic process where governments combine public and private provision with an active role as service provider and market player. © 2001 by the Association for Public Policy Analysis and Management.
Local governments can provide services with their own employees or by contracting with private or public sector providers. We develop a model of this 'make-or-buy' choice that highlights the trade-off between productive efficiency and the costs of contract administration. We construct a dataset of service provision choices by U.S. cities and identify a range of service and city characteristics as significant determinants of contracting decisions. Our analysis suggests an important role for economic efficiency concerns, as well as politics, in contracting for government services. Copyright 2010 The Authors. The Journal of Industrial Economics 2010 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.
This article develops a framework for efficient IV estimators of random effects models with information in levels which can accommodate predetermined variables. Our formulation clarifies the relationship between the existing estimators and the role of transformations in panel data models. We characterize the valid transformations for relevant models and show that optimal estimators are invariant to the transformation used to remove individual effects. We present an alternative transformation for models with predetermined instruments which preserves the orthogonality among the errors. Finally, we consider models with predetermined variables that have constant correlation with the effects and illustrate their importance with simulations.