Cost and Efficiency in Government Outsourcing: Evidence from the Dredging Industry
AbstractThis 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.
CitationBarkley, 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.20190018
- D44 Auctions
- H41 Public Goods
- H57 National Government Expenditures and Related Policies: Procurement
- L84 Personal, Professional, and Business Services