Fiscal Balance Impacts of Government Outsourcing: Political Ideology as a Moderating Factor

Government outsourcing has emerged as a significant strategy for managing government organizations in the delivery of public goods and services, attracting considerable attention in the fields of public administration and policy studies. This study investigates the relationship between government outsourcing and fiscal balance while examining the moderating role of left- and right-wing political ideologies. Employing panel analysis of data from 31 OECD countries over the period of 2009–2019, the findings indicate that government outsourcing negatively affects fiscal balance, resulting in an increase in the primary balance deficit. However, the impact varies based on political ideology. Specifically, conservative ideology is associated with enhanced fiscal soundness through outsourcing, while progressive ideology is found to worsen fiscal balance. To infer the underlying mechanisms driving these outcomes, the study reveals that outsourcing, in conjunction with conservative ideology, is linked to reduced government expenditure and public employment. Conversely, progressive ideology is associated with increased government expenditure and public employment.