The Relationship Between Population Size and Contracting Out Public Services

Abstract

What is the causal relationship between population size and the contracting out of public service delivery in local governments? The size of the population of a given municipality has long been thought to be an important driver of contracting out public service delivery, which theoretically streamlines public service production and saves taxpayers’ money. This article makes use of the 2007 Danish local government structural reform—when 239 municipalities were merged into 66 new entities while 29 municipalities remained untouched—as a quasi-experiment to explore the population size/contracting out relationship. Results show that the relationship differs across policy sectors: It is negative for services with high fixed costs, presumably due to scale economies, and is positive for services that are difficult to measure, probably due to more administrative and technical capacity in larger municipalities. Also, the effect of population size is positive for tasks in free-choice markets, presumably because private contractors find large free-choice markets more attractive.

Public Sector Unions and Privatization: Evidence From the Eldercare Sector in Danish Municipalities

“…These control variables generally show the patterns expected for the Danish context. Contrary to most international studies (Guardiola et al 2010), fiscal stress is associated with significantly less privatization, which is not a surprising finding for Danish municipalities in general (Bhatti et al 2009;Pallesen 2004) and for free choice markets in particular (Foged 2015a). Thus, private contractors can be expected to be attracted by markets with high earnings potential, such as affluent municipalities (where service levels and therefore payments to private contractors are often higher and where elderly are more disposed to buy add-on services) and localities with increasing demand.…”

“…Where recent research has seen advances in estimating the effect of ideology (Elinder and Jordahl 2013;Guardiola et al 2010;Sundell and Lapuente 2012), fiscal stress (Guardiola et al 2010), and scale and market characteristics (Foged 2015b;Girth et al 2012;Hefetz and Warner 2012), the influence of interest groups remains an outstanding issue due to some of the same challenges highlighted by George Boyne more than 15 years ago (Boyne 1998).…”

“…As indicated, a literature review from 2007 found that only one quantitative European study had examined public employees with an indicator that was not by definition endogenous to privatization (Bel and Fageda 2007, 526). This lack of research on the relationship between special interest groups and privatization is noteworthy since variation in privatization across policy areas could be due to differences in the political influence of special interest groups (Foged 2015a;Petersen et al 2015).…”

Political Ideology and Social Services Contracting: Evidence from a Regression Discontinuity Design

“…From this point of view, some public services may be more politically sensitive, and therefore susceptible to ideological and partisan effects, than others. In particular, Petersen, Houlberg, and Christensen (, 563) argue that decisions relating to social services may be more strongly influenced by the ideology of the ruling party than technical services, since social services users and professionals are more easily mobilized and well organized—a view supported by their research in Denmark, which identifies ideological effects for the contracting out of social services, but not any other services (see Foged for similar findings). Hence, our focus here on the contracting out of children's social services may reveal the presence of an especially strong ideological effect.…”

The Policy Strategy for the Acceleration of Population Data Integration and Its Utilization in Indonesia: A Study on the Health Sector Financing

“…The size of city population has long been considered as an important support of public service contract. This relationship is different in various policy sectors: It is negative for the services with high fixed costs due to economic scale, and positive for the services that are difficult to measure due to the large administrative and technical capacity in a larger city [10].…”