Production Choices for Local Government Services

:This article models the production choice decision of local governments for the delivery of services to citizens. fie production choice decision depends on the demand by the local government for contracting out and the supply of external producers. Local governments trade off the potential cost savings of external production against diminished control of the service delivery process. Fiscal, political, and structural constraints affect the willingness of a local government to consider this tradeoff The model is estimated for eight local government services using data from a national sample of local governments. The services represent a cross-section of those provided by local governments, including public works, recreational, and social services. The results indicate the general importance of fiscal forces, resistance by public employees, and cost savings that result from competitive supply markets on the production choice decision.