National Trends
The International City County Management Association conducts a survey of Alternative Service Delivery by local governments every five years. The comprehensive nature of restructuring options studied and the broad range of services covered make this the best source for tracking changes in local government service delivery. The data cover the period 1982-1997.
Privatization and the Market Structuring Role of Local Government
Mildred Warner and Amir Hefetz
Abstract:
National data on local government service delivery (collected by the International City County Management Association) shows privatization has not increased dramatically since 1982. This paper seeks to understand why there has been so little growth in privatization. Theory offers two possible answers: government failure or quasi-market failure. While government failure (bureaucratic concerns over loss of control by local officials and employee resistance) may explain the failure to privatize more, our data provide limited support for this view. We argue that failure in contract markets themselves may explain the continued primacy of publicly provided public services.
Using longitudinal data from 1982 to 1997, we show that the local decision to provide public services is complex and dynamic. Local governments use a range of service restructuring alternatives including privatization, mixed public/private provision and cooperation between governments. Service delivery is a dynamic process reflecting changing citizen demand for services and new privatization. The data also show significant instability in contracts, including contracting in - the reverting back to public provision of previously privatized services. This "reverse privatization" may reflect problems with the contracting process itself, limited efficiency gains, erosion in service quality or concern over the loss of broader community values associated with public service delivery.
Privatization does not imply a retreat of government but rather a more active engagement with the market. Whether as regulator, contractor or direct service provider, local governments manage markets to create competition and ensure service quality and stability. This pragmatic market structuring role is critical to ensure that both efficiency and the broader public benefits of service delivery are achieved.
Presentation to the Economic Policy Institute's Conference on Privatization: Trends, Issues and Alternatives, January 11, 2001
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