The Determinants of Variations in Local Service Contracting

Empirical evidence on the determinants of variations in service contracting across U.S. local governments is evaluated. Four main categories of explanatory variables are analyzed: fiscal stress, scale and market structure, public preferences, and the power of public employees. The evidence contains fundamental deficiencies that include poor measures of the theoretical constructs, reciprocal relationships between contracting out and the explanatory variables, and additive tests of mediative theories. The consequence is that the determinants of service contracting remain largely undetected. Furthermore, the empirical studies add very little to the existing body of knowledge on the reasons for policy variations across local governments.