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This dissertation empirically tests theoretical arguments that contracting out municipal services results in lower service expenditures. Two research questions are investigated; what accounts for local government service provision and production decisions? And, to what extent do contracting out and the choice of sectors from which contractors are drawn influence levels of service expenditures by local governments? These questions are investigated by applying a transaction cost framework to develop testable hypotheses and explain fiscal impact of municipality's service production arrangements. The empirical analysis focuses on the decision to contract out services and the resulting cost savings (if any) that result from contracting out. Six service areas for which expected transaction costs are significant were selected for analysis. These services also vary in terms of their service characteristics based on the tangibleness of service outputs and the complexity of service products. The services examined are: 1) electric utilities, 2) fire protection, 3) police, 4) parks, 5) libraries, and 6) public health services. The empirical results indicate that service specific characteristics are key determinants of contracting out decisions, the choice of sectors, and the cost savings realized from service production choices. Nonprofit production is concentrated in the softer social and human service areas. While some of the conventional thoughts on the inefficiency of government monopoly are consistently supported across all selected six services, the cost savings from private contracting to for-profit firms are only realized for electricity and fire protection service. Nonprofit organizations are an attractive option when municipalities face transaction cost incurred from difficulty in measurability of service outputs and high costs to monitor multiple dimensions of service quality. It has been found that independent nonprofit service market for lowering bidding price is important for local contracting out. This dissertation suggests that local governments may be able to partially overcome tradeoffs between cost and quality of publicly provided services by contracting out the delivery to nonprofit organizations.
Nonprofit Organizations, Contracting Out, Local Government, Service Delivery, Privatization
Date of Defense
December 6, 2005.
Submitted Note
A Dissertation submitted to the Askew School of Public Administration and Public Policy in partial fulfillment of the requirements for the degree of Doctor of Philosophy.
Bibliography Note
Includes bibliographical references.
Advisory Committee
Richard C. Feiock, Professor Directing Dissertation; Carol S. Weissert, Outside Committee Member; Frances S. Berry, Committee Member; Ralph S. Brower, Committee Member.
Publisher
Florida State University
Identifier
FSU_migr_etd-3561
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