American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Cost and Efficiency in Government Outsourcing: Evidence from the Dredging Industry
American Economic Journal: Microeconomics
vol. 13,
no. 4, November 2021
(pp. 514–47)
(Complimentary)
Abstract
This paper investigates the how government outsourcing affects efficiency and expenditures by considering how outsourcing decisions are determined along two dimensions: (i) cost differences between private firms and government suppliers of public goods and (ii) dynamics arising from cost complementarities and capacity constraints. I formulate and estimate a dynamic model of government outsourcing using project-level data from the dredging industry. Model estimates indicate substantial cost savings due to outsourcing but also that government presence in the market yields cost reduction. A counterfactual policy featuring direct competition between government and private sector firms finds a total expenditure reduction of 15.7 percent.Citation
Barkley, Aaron. 2021. "Cost and Efficiency in Government Outsourcing: Evidence from the Dredging Industry." American Economic Journal: Microeconomics, 13 (4): 514–47. DOI: 10.1257/mic.20190018Additional Materials
JEL Classification
- D44 Auctions
- H41 Public Goods
- H57 National Government Expenditures and Related Policies: Procurement
- L84 Personal, Professional, and Business Services
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