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Privatization

Privatization is a worldwide phenomenon. In recent years all levels of government, seeking to reduce costs, have begun turning to the private sector to provide some of the services that are ordinarily provided by government. The spread of the privatization movement is grounded in the fundamental belief that market competition in the private sector is a more efficient way to provide these services and allows for greater citizen choice. In practice, however, concerns about service quality, social equity, and employment conditions raise skepticism of privatization. In New York State, labor concerns are also a major issue. Although empirical studies do not provide clear evidence on the costs and benefits of privatization, public perception and pressure for improved government efficiency will keep privatization on the government agenda. A review of recent literature on the theoretical and practical debates on privatization follows. A set of links to Professor Warner's research on national and New York State trends is also available on this site.

Overview

Most privatization research is based on case studies. The following books by E. S. Savas and Elliot Sclar lay out key theoretical and empirical arguments for and against privatization. Proponents argue that private firms are more efficient than government because of economies of scale, higher labor productivity, and fewer legal constraints. He faults government service provision for its monopoly status and inability to be responsive to citizens' needs, resulting in inefficient, one-size-fits-all services. Critics argue that the nature of government services makes many of them inappropriate for privatization. They also point out that contracting may entail hidden costs, because of lack of information, the need for monitoring, and "low-ball" bidding. They note that in some places creating the competition necessary for effective contracting is impossible, and suggest that in practice privatization is more complicated than it seems.

Savas, E. S. 1987. Privatization: The Key to Better Government. Chatham, NJ: Chatham House.  Savas, an advocate of privatization, describes the theory and practice of privatization and alternative service delivery arrangements, illustrating the appropriate use of various privatization techniques.

Sclar, Elliot, 2000.  You Don’t Always Get What You Pay For: The Economics of Privatization.  Ithaca, NY:  Cornell University Press.  Elliot Sclar lays out and critiques the standard market-based arguments for privatization, using local government case studies. He concludes that advocates of privatization should proceed with caution.

Theory--Competition The theory of privatization is fundamentally based on the notion of competition and the efficiency and choice that it engenders.

Tiebout, Charles 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy 64:416-424.  In this classic article based on public choice theory, Charles Tiebout puts forth a model for determining the optimum expenditure level for public goods. He treats residents as consumers, who “shop around” for the communities that best fit their preferences. The competition among communities forces them to provide public goods at the most efficient level.

Boyne, George A. 1996. "Competition and Local Government: A Public Choice Perspective." Urban Studies 33 (4-5): 703-721.   Competition and Local Governance

Bennett, Robert. 1990. "Decentralization, Intergovernmental Relations and Markets: Towards a Post-Welfare Agenda?" Pp. 1-26 in Decentralization, Local Government and Markets: Towards a Post-Welfare Agenda, ed. Robert Bennett. Oxford: Clarendon Press.  This article puts privatization in a theoretical context. Both decentralization and privatization reflect decentralizing trends from state to market and state to local levels of government.

Theory--Competition Critiques Competition is rarely found in markets for public goods because of the fundamental structure of such markets.

David Lowery, 1998. "Consumer Sovereignty and Quasi-Market Failure" Journal of Public Administration Research and Theory, pp.137-172.  The intention of quasi-markets is to promote consumer sovereignty and efficient provision of goods and services. Lowery contends that quasi-markets often fail to meet these objectives due to 1) failure of market formation (lack of competition), 2) failure by preference error on the part of consumers and 3) failure by preference substitution (the difference between individual and collective wants). Direct government provision of goods and services, with its hierarchy and bureaucratic controls, may be needed precisely because it is less responsive to market influences.

Sclar, Elliot, 2000.  "What’s Competition Got to Do with It? Market Structures and Public Contracting," Chapter 4 of You Don’t Always Get What You Pay For: The Economics of Privatization.  Ithaca, NY:  Cornell University Press.   In this chapter, Sclar challenges the argument that privatization creates competition, and therefore efficiency, in the public sector. Due to the nature of public goods, which may be less profitable and more complicated to deliver, most public contracting has no competition (monopoly) or minimal competition among very few firms (oligopoly).

Kodras, Janet. 1997. "Restructuring the State: Devolution, Privatization, and the Geographic Redistribution of Power and Capacity in Governance." Pp. 79-96 in State Devolution in America: Implications for a Diverse Society. Ed. Lynn Staeheli, Janet Kodras, and Colin Flint. Urban Affairs Annual Reviews 48. Thousand Oaks, CA: Sage.  Kodras outlines some of the major arguments for and against three methods of changing how government services are provided: privatization, devolution to lower levels of government, and simply abandoning service provision to the nonprofit sector.

Warner, M.E., 2003. "Competition, Cooperation and Local Governance," chapter 19 pp 252-262 in Challenges for Rural America in the Twenty First Century, edited by David Brown and Louis Swanson, University Park, PA: Penn State University Press.  

Theory--Coasian Bargaining and Transaction Costs Coasian bargaining creates the potential for market solutions to the provision of public goods. However it raises the issue of transactions costs which may be hard to manage.

Webster, Christopher J., (1998). "Public Choice, Pigouvian and Coasian Planning Theory," Urban Studies 35(1):53-75  This article contrasts Pigouvian (welfare) and Coasian economics in the context of planning theory, and gives examples from land-use planning. Webster suggests that Coasian bargaining may provide solutions to the problem of public goods provision.

Staley, Samuel and Lynn Scarlett. 1997. "Market Oriented Planning: Principles and Tools." Los Angeles: Reason Public Policy Institute. http://www.rppi.org/ps236.html 
The Reason Public Policy Institute promotes market solutions over government regulation.  This article provides an example of Coasian bargaining with respect to land use planning. Staley and Scarlet propose changes to current planning processes, to streamline the development process and reduce transaction costs. They argue that in order to accommodate evolving societal land use needs, governments should use market based bargaining procedures that involve only direct stakeholders.

Williamson, Oliver 1999. “Public and Private Bureaucracies: A Transaction Cost Economics Perspective,” Journal of Law, Economics and Organization 15(1):306-342. Williamson examines public bureaucracy through the lens of transaction cost economics, pointing out that public bureaucracy, like other modes of governance, is well suited to some transactions and poorly suited to others. Williamson claims that there is an efficient place for public bureaucracy, but that each type of governance (markets, hybrids, firms, regulation), has its own place.

Zerbe, Richard O. and Howard E. McCurdy. 1999. "The Failure of Market Failure," Journal of Policy Analysis and Management 18(4):558-578.  Zerbe and McCurdy argue that the case for eliminating market failure through the internalization of externalities is flawed, and that governments should intervene in the marketplace only when they have the ability to lower transaction costs

Sclar, Elliot 2000.  "All in the System: Organizational Theories and Public Contracting," Chapter 5 of You Don’t Always Get What You Pay For: The Economics of Privatization.  Ithaca, NY:  Cornell University Press.   Chapter 5: All in the System – Organizational Theories and Public Contracting Sclar points out that public contracting is difficult and the transaction costs are often quite high.

Theory--Political Economic Critiques Privatization is not only about economics; it is also about politics. Political interest groups play a major role. Privatization also represents an overarching political agenda to alter the relationship between government and citizen.

Feigenbaum, Harvey and Jeffrey Henig.  1994.  "The Political Underpinnings of Privatization: A Typology". World Politics 46 (Jan. 1994): 185-208.  The authors discuss the different political lenses through which privatization is viewed. They emphasize pragmatic privatization as a means of cost-cutting, tactical privatization as a way of rewarding allies, and systemic privatization to change institutional structures and societal ideologies. They article primarily focuses on systemic privatization.

Henig, Jeffrey 1989-90. "Privatization in the United States: Theory and Practice." Political Science Quarterly. 104(4):649-670.  Henig traces the development of the theory and the practice of privatization in the United States until 1989-90. He argues that privatization is a new name for an old practice of government contracting. He points to the political nature of the privatization agenda and questions its long term viability.

Frug, Gerald E. "Alternative Conceptions of City Services," in City Making: Building Communities without Building Walls. Princeton: Princeton University Press, 1999.  Frug criticizes Tiebout’s model as leading to cities which resemble self-segregated voluntary associations of consumers who want privatized services, which these consumers view as “objects of consumption” for those who can afford to pay. He also reviews several attempts to modify the Tiebout model.

Starr, Paul. 1987. "The Limits of Privatization." Washington, D.C.: Economic Policy Institute.  This article provides a theoretical critique of privatization and its potential effects on justice, security, and citizenship. Starr also disputes two main arguments of privatization advocates: that with privatization 1) choice will increase and 2) costs will be reduced.

Folbre, Nancy 2001. " Measuring Success," in The Invisible Heart. New York: The New Press. Pp 53-82.  Folbre discusses the adverse effects privatization and competitive pressures on the quality of services in care sectors. Standard economic measures used to make privatization decisions fail to accurately assess the real costs and benefits of care.

Kabeer, Nalia.  "’Rational Fools’ or ‘Cultural Dopes’? Stories of structure and agency in the social sciences.". Chapter 2 pp16 – 48 in The Power to Chose; Bangladeshi Women and Labor Market Decisions in London & Dhaka, New York: Verso, 2000.  Kabeer discusses two contradictory positions in social science theory that attempt to explain social and economic change. Neo-classical economics focuses on the individual while structural approaches propose that larger social structures explain human behavior. Kabeer offers a compromise between the two as a better model, using Bangledeshi women in the labor force as an example.

Empirical Studies - Trends

Warner, M.E. and Amir Hefetz 2004.  "Pragmatism over Politics: Alternative Service Delivery in Local Government, 1992-2002," chapter in The Municipal Year Book 2004. Washington, DC: International City County Management Association.   ICMA has been tracking local governments’ use of alternative service delivery approaches since 1982, finding that privatization trends have actually change little over the years. What has risen most dramatically over the 1992-2002 time period is the use of mixed public/private provision.

Warner, M.E. and Amir Hefetz, 2001.  "Privatization and the Market Role of Government," Briefing Paper, Economic Policy Institute, Washington, DC.  Available at epinet.org.   This article uses national data published by the International City/County Management Association (ICMA) for the period 1982 to 1997 to show that service delivery by public employees remains the dominant form of service provision over the wide range of restructuring alternatives and that privatization has not increased dramatically. It evaluates two theories as to why privatization has not increased: government failure and quasi-market failure.

Greene, Jeffrey D. 1996. "How Much Privatization: A Research Note Examining the Use of Privatization by Cities in 1982 and 1992." Policy Studies Journal 24 (Winter): 632-640.  Green reviews survey results of the International City/County Management Association for 596 cities, between 1982 and 1992, that gauged how much municipalities had privatized and their reasons for privatization. The study used two indicators of privatization, privatization levels, and privatization diversity.

Empirical Studies - Reviews of Other Studies

Boyne, George A. (1998). "Bureaucratic Theory Meets Reality: Public Choice and Service Contracting in U.S. Local Government." Public Administration Review. 58(6): 474-483.  Statistical methods used in studies cited by public choice theorists lack critical control variables and a reliable measure of competition, and therefore lead to invalid conclusions. Boyne aims to reevaluate the empirical evidence on the effects of service contracting by United States local governments.

Boyne, George A (1998).  "The Determinants of Variations in Local Service Contracting: Garbage in Garbage Out?" Urban Affairs Review, Vol.  34, No. 1, pg. 150-163.  Boyne offers an overview of various empirical studies that focus on the determinants of why certain local governments opt to contract out. Boyne aims to answer two questions: 1) To what extent do empirical studies provide an explanation of variations in service contracting? 2) Does the evidence improve our understanding of why different local governments adopt different policies?

Empirical Studies--The Contracting Process Issues surrounding contracting out include the cost of information and monitoring and the need to create a level playing field for competitive bidding between public workers and the private sector. The contracting process is dynamic (contracting out and back in) and requires governments to play a market structuring role.

Hefetz, Amir and M. Warner, 2004. "Privatization and Its Reverse: Explaining the Dynamics of the Government Contracting Process" Journal of Public Administration, Research and Theory, 14(2):171-190. Available at http://jpart.oupjournals.org/cgi/content/abstract/14/2/171?ijkey=156SEfUPE3BE2&keytype=ref   This article shows that the level of contracting back in previously privatized services is significant among local governments in the US. A statistical model assessing the reasons for such behavior is presented.

Warner, M.E. with Mike Ballard and Amir Hefetz 2003.  "Contracting Back In – When Privatization Fails," chapter 4 pp 30-36 in The Municipal Year Book 2003. Washington, DC: International City County Management Association.  Between 1992 and 1997, the most common forms of alternative service delivery (privatization to for-profits and non-profits and inter-municipal cooperation) increased only slightly. The stability in these trends belies a more dynamic process of contracting out and back in which reflects the key market structuring role played by local governments.

Warner, M.E. and A. Hefetz. 2002  "Applying Market Solutions to Public Services: An Assessment of Efficiency, Equity and Voice," Urban Affairs Review, 38(1):70-89.  The authors assess the efficacy of market solutions for metropolitan public service provision by comparing privatization with inter-municipal cooperation and evaluating each on efficiency, equity and democracy grounds. They find both alternatives promote efficiency, but equity and voice are more associated with inter-municipal cooperation than privatization.

Ballard, Michael J. and M.E. Warner 2000. "Taking the High Road: Local Government Restructuring and the Quest for Quality."  Pp 6/1 - 6/53 in Power Tools for Fighting Privatization, American Federation of State, County and Municipal Employees: Washington DC.  Available at http://government.cce.cornell.edu/doc/reports/highroad/  Using detailed case studies, this report outlines two alternative strategies for improving local government service delivery—the "high road” which uses new management innovations to increase internal productivity, and the “low road” which focuses on downsizing and contracting out.

Sclar, Elliott. 1997. "The Privatization of Public Service: Lessons from Case Studies."Washington, D.C: Economic Policy Institute.  This article presents several case studies that show public sector employees can provide a more efficient alternative to privatization: the Albany Department of Public Works, highways in Massachusetts, and Indianapolis Fleet Services.

Lehmann, Scott. Privatizing Public Lands. 1995. New York: Oxford University Press.  Lehman takes the special case of public lands and shows the limits of market allocation mechanisms.

Miranda, Rowan and Allan Lerner. (1995). "Bureaucracy, Organizational Redundancy and the Privatization of Public Services." Public Administration Review 55(2): 193-200.  Privatization alone may not lead to better quality or cost reduction in public service delivery. Miranda and Lerner note the relatively high level of mixed (public and private) production for the same service and seek to explain how such redundancy could still be efficient. They argue redundancy can enhance competition, provide a benchmark for costs, and ensure failsafe security in the event of contract failure.

Sclar, Elliot D., K. H. Schaeffer, and Robert Brandwein. 1989. "The Emperor's New Clothes: Transit Privatization and Public Policy." Washington, D.C.: Economic Policy Institute.  This article uses the example of the Urban Mass Transportation Administration, which has mandated state and local transit authorities to privatize their operations, to illustrate that private sector delivery of public goods and services is not nearly as advantageous as its proponents claim.

Moulder, Evelina. 1994. "Privatization: involving citizens and local government employees." Baseline Data Report 26 (1): 1-7.  This article summarizes the results of a survey conducted by the International City/County ManagementAssociation (ICMA) in 1992 on local area alternative service delivery, focusing on the involvement of workers and citizens in decisions to contract for government services.

Pack, Janet Rothenberg. 1989. "Privatization and Cost Reduction." Policy Sciences 22: 1-25.  Pack evaluates the success and sustainability of service cost reduction from the perspective of the economic model of cost minimization through competitive bidding.

The Reason Foundation (http://www.reason.org/privatizationctr.html), established in 1978, provides excellent materials on privatization, through their Privatization Center. Advocating public policies based upon individual liberty and responsibility and a free-market approach, the Center undertakes to practical policy research. Their annual year book, Privatization, describes recent developments in privatization, including the following articles.

The Reason Foundation. 1996. "The Politics of Privatization." Privatization 1996. Based on excerpts of several mayors' remarks, this article argues competition is the key to smaller government. The latter part presents the job-loss impact of privatization.

The Reason Foundation. 1997. "Creating the Right Institutions for Competitive Government." Privatization 1997. This article describes how to create a level playing field between in-house public units and outside private providers, called "competitive neutrality," when setting up a public-private competition program.

Empirical Studies--Regional Differences

Warner, M.E. and A. Hefetz. 2003. "Rural-Urban Differences in Privatization: Limits to the Competitive State," Environment and Planning C: Government and Policy 21(5): 703-718.   Despite two decades of experience with privatization, US local government use of contracting in public service delivery remains relatively flat. Market approaches to public goods provision emphasize the competitive state, and attribute limited degree of privatization to bureaucratic resistance. Rural development theory emphasizes the uneven impact of market solutions in rural communities. Using national data on US local government service delivery from 1992 and 1997, we analyze differences in local government service-delivery patterns by metropolitan status. Discriminant analysis suggested that structural features of markets are more important than the managerial capacity of government leaders in explaining lower rates of privatization among rural governments. These structural constraints limit the applicability of competitive approaches to local government service delivery. Our results suggest that cooperation, as an alternative to privatization at the local level and as a source of redistributive aid at the state level, may provide a more equitable alternative for disadvantaged rural communities.

Warner, M.E. and A. Hefetz. 2002. "The Uneven Distribution of Market Solutions for Public Goods," Journal of Urban Affairs, 24(4): 445-459.  Using national data on local government service delivery from 1992 and 1997, this article assesses the distribution of privatization and inter-municipal cooperation across localities in the metropolitan region and finds them most common among suburbs.

New York State

Warner, M.E. and Robert Hebdon. 2001 "Local Government Restructuring: Privatization and Its Alternatives," Journal of Policy Analysis and Management 20(2):315-336.  Rather than treating public and private provision of public goods and services as a strict dichotomy, a 1997 survey of chief elected township and county officials in New York shows 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.

Warner, M.E. 2000. "Structuring the Market for Service Delivery: A New Role for Local Government." pp 85-104 in Local Government Innovation: Issues and Trends in Privatization and Managed Competition, Robin Johnson and Norman Walzer eds.  Westport, CT: Quorum Books.  Case study analysis of reverse privatization among New York State towns and counties shows how governments engage the market to ensure competition, control and attention to community values. The nature and relative importance of three alternatives to privatization – inter-municipal cooperation, reverse privatization and governmental entrepreneurship are described.

Warner, M.E. and R. Hebdon "Local Government Restructuring in New York State: Summary of Survey Results"  Restructuring in New York State primarily involves public sector innovation rather than privatization. Intermunicipal cooperation was the predominant form of restructuring, while privatization was the second most common form of restructuring. Significant levels of reverse privatization and governmental entrepreneurship were also found. Incidence of restructuring was highest among counties, and in the following service areas: public works, public safety, and general governmental support functions.

Search the database of case studies on local government restructuring in New York State: http://government.cce.cornell.edu/db/lgr/search.asp

Hebdon, Robert, and Hazel Dayton Gunn. 1995. "The Costs and Benefits of Privatization at the Local Level in New York State." Community Development Report. Ithaca, NY: Community and Rural Development Institute, Cornell University (http://www.cardi.cornell.edu/local_government/community_governance/000244.php)  Hebdon and Gunn provide a brief overview of the privatization debate, at the level of local service delivery.

Savas, E. S., ed. 1992. Privatization for New York: Competing for a Better Future. The Lauder Report; A report of the NYS Senate Advisory Commission on Privatization. New York.  This volume provides a review of experiences with privatization in New York State and recommendations for expanding its use, from a proponent's perspective. It also introduces the experiences of other states and cities, and the special experiences gained in Britain.

Labor Concerns

Another major issue is the impact of privatization on job security and employment. Proponents claim that public sector workers are not harmed by privatization. Displaced workers can be hired by contractors or transferred to other government positions. Organized labor, however, is very concerned about layoffs, erosion of wages and benefits, and decreased levels of union membership with privatization. Empirical studies show that privatization has not had a major impact on wages and working conditions (Pendleton 1997), but it can have significant effects on labor relations (Hebdon 1995). Opponents present case studies that show public sector employees can provide more efficient alternatives to privatization (Sclar 1997). The expertise and experience of many government employees may make them better at providing government services, and management techniques like total quality management are making the public sector more efficient.

Chandler, Timothy, and Peter Feuille. 1994. "Cities , Unions, and the Privatization of Sanitation Services." Journal of Labor Research 15 (1): 53-71.  This article analyzes the relationship between unionization and government decisions to contract out sanitation services using a conceptual framework that emphasizes political considerations.

Chandler, Timothy, and Peter Feuille. 1991. "Municipal Unions and Privatization." Public Administration Review 51 (1): 15-22.  The authors examine the impacts of unionization on local governments' decision to contract out sanitation services, based on a survey of 1,541 municipalities between 1973 and 1988.

Hebdon, Robert. 1995. "Contracting Out in New York State: The Story the Lauder Report Chose Not to Tell." Labor Studies Journal (Spring): 3-29.  The author sees privatization as a disruptive, harmful way of cost saving. Examining the history of collective bargaining in New York State, he emphasizes the negative impact of privatization on unions and workers.

Pendleton, Andrew. 1997. "What Impact Has Privatization Had on Pay and Employment:A Review of the UK Experience." Industrial Relations 52 (3): 554-579.  The article analyzes the theoretical and actual impact of privatization on labor conditions in the United Kingdom. The article concludes privatization does not have a consistent and strong effect on pay and employment.

Donovan, Ronald, and Marsha J. Orr. 1982. "Subcontracting in the Public Sector: The New York State Experience." Ithaca, NY: Cornell University.  The authors examine subcontracting out transportation services in school districts in New York State. They propose a list of standards to judge when subcontracting should be subject to negotiation and arbitration.

Legal Concerns

Legal concerns beyond labor issues are also important considerations in privatization. Legal debate starts from the argument that the public and private sectors are essentially different and their separate functions can be logically designated. The following articles raise concerns about constitutional protections of citizens and emphasize the legal characteristics of public entities. Opponents worry that privatization may threaten citizens' constitutional rights.

Moe, Ronald C. 1987. "Exploring the Limits of Privatization." Public Administration Review 47 (Nov/Dec): 453-460.  This article argues the most important distinction between private and public entities lies in the concept of sovereignty that inheres in the public sector, giving it rights and immunities that the private sector does not, or at least ought not, possess.

Sullivan, Harold J. 1987. "Privatization of Public Services: A Growing Threat to Constitutional Rights." Public Administration Review 47 (Nov/Dec): 461-467.  This article reviews the judicial decisions concerning the scope and applicability of national constitutional protections on privatization. It also examines and identifies a number of arrangements between government and private service providers that immunize both the government and private entities from constitutional restraints.

Starr, Paul. 1987. "The Limits of Privatization." Washington, D.C.: Economic Policy Institute.  This article provides a theoretical critique of privatization and its potential effects on justice, security, and citizenship. Starr also disputes two main arguments of privatization advocates: that with privatization 1) choice will increase and 2) costs will be reduced.

Gerbasi, Jennifer and M.E. Warner, June 2003.  "The Impact of International Trade on State and Local Government Authority, " Dept. of City and Regional Planning Working Papers #204.  Ithaca, NY: Cornell University. Available at  http://government.cce.cornell.edu/?/doc/reports/freetrade/#book1 /   Free trade has been pursued to expand markets and create jobs. However, the new trade agreements (NAFTA, WTO, FTAA, GATS) reach beyond traditional customs and tariff regulations and impacts all government activity that may affect foreign trade. There is some concern in the governance community that these changes may lead to federal preemption of traditional powers reserved to states and localities.

Warner, Mildred and Jennifer Gerbasi. "Rescaling and Reforming the State under NAFTA: Implications for Subnational Authority." International Journal of Urban and Regional Research December 2004 Vol 28(4): 853-73.  This paper describes the new governance features of the North American Free Trade Agreement (NAFTA) and illustrates how they work out at the national, subnational and local scales using cases from the United States and Mexico. The authors show how NAFTA’s governance structure is undermining subnational and local government authority in legislative and judicial arenas.

Jennifer Gerbasi, Jennifer and Mildred Warner. 2004, "Is There a Democratic Deficit in the Free Trade Agreements? What Local Governments Should Know," Public Management 86:2 (16-21).  

International Experience

Kohl, Benjamin, 2004. "Privatization and Regulation: A cautionary tale from Bolivia," submitted to International Journal of Urban and Regional Research, forthcoming 28(4) 2004.  Kohl uses the Bolivian experience with privatization to illustrate the limitations of privatization in developing countries.

Shughart, William F. II 1999. "Interest Group Theory of Government in Developing Economy Perspective," in Institutions and Collective Choice in Developing Countries ed by Mwangi Kimenyi and John Mbuku. Brookfield, VT: Ashgate Publishing Co. pp 169-198.  This paper outlines the interest group or the ‘capture’ theory of government: the same behavioral assumptions of maximization of self-interest that explain decision-making of the market can be used to explain the behavior of public policy makers.

Graham, Carol. 1998. Private Markets for Public Goods: Raising the Stakes in Economic Reform. Washington DC: Brooking Institute Press.  In this book, Graham examines the use of markets to increase the efficiency of the public sector. She uses case studies of Chile, Peru, Bolivia, Czech Republic and Zambia to assert that private market incentives such as competition and choice strengthen participation and improve performance.

Schick, Alan (1998). "Why Most Developing Countries Should Not Try New Zealand’s Reforms."  World Bank Research Observer 13(1):123-131.  New Zealand’s government agencies are run by independent public managers who contract out most services and are monitored for accountability. Schick’s article looks at New Zealand’s system, both the benefits and cost, and finds reason that this system would not work for developing countries with large informal economies.

Clifford Wirth, "Transportation Policy in Mexico City: The Politics and Impacts of Privatization" Urban Affairs Review, Vol. 33, No. 2, November 1997, pp. 155-181.  In this article, Wirth challenges the idea that privatization occurs only when public sector responsibilities are shifted to private providers. He advocates a cost-benefit analysis that includes social and environmental externality costs and claims that local government officials should be accountable for both the decisions they choose to take and the one they refuse to make.

Canadian Council for Public/Private Partnerships, 1996. National Opinion Research. Toronto. The Canadian Council for Public/Private Partnerships surveyed over 200 governments across Canada to assess: 1) current partnership activities, 2) planned partnership activities, 3) perspectives on partnerships and, 4) support for implementing partnerships.

Special Projects

Gratto, Andre, Bryan Preston, and Thor Snilsberg. Mitigating Corruption in New Public Management.  Ithaca NY:  Cornell University Department of City and Regional Planning.  This article provides an environmental framework for reducing potential for corruption.

McFarland, Stephen, Chris McGowan and Tom O’Toole (2002).  "Prisons, Privatization and Public Values." Ithaca NY:  Cornell University Department of City and Regional Planning.  

Warner, Mildred, James Quazi, Brooks More, Ezra Cattan, Scott Bellen and Kerim Odekon (2002)  Business Improvement Districts:  Issues in Alternative Local Public Service Provision.  Ithaca NY, Cornell University Department of City and Regional Planning.  

Transfer of Development Rights Programs: Using the Market for Compensation and Preservation (2002). Jason Hanly-Forde, George Homsy, Katherine Lieberknecht, Remington Stone. This article reviews the challenges to Coasian bargaining solutions for planning.