Contracting for Government Services: Theory and Evidence from U.S. Cities

43 Pages Posted: 27 Aug 2007 Last revised: 25 Dec 2022

See all articles by Jonathan Levin

Jonathan Levin

Stanford Graduate School of Business; Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Steven Tadelis

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: August 2007

Abstract

Local governments can provide services with their own employees or by contracting with private or public sector providers. We develop a model of this "make-or-buy" choice that highlights the trade-off between productive efficiency and the costs of contract administration. We construct a dataset of service provision choices by U.S. cities and identify a range of service and city characteristics as significant determinants of contracting decisions. Our analysis suggests an important role for economic efficiency concerns, as well as politics, in contracting for government services.

Suggested Citation

Levin, Jonathan D. and Tadelis, Steven, Contracting for Government Services: Theory and Evidence from U.S. Cities (August 2007). NBER Working Paper No. w13350, Available at SSRN: https://ssrn.com/abstract=1009800

Jonathan D. Levin (Contact Author)

Stanford Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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Steven Tadelis

University of California, Berkeley - Haas School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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