Private Markets, Contracts, and Government Provision

Abstract

The authors study determinants of market organization of local public services by an examination of one of the most visible services, residentialwaste management. Using a multinomial logit model and data for 1,000 U.S. communities, the authors explore the effects of political influence, voter ideology, environmental constraints, production costs, and contracting transaction costs on a community’s choice of service delivery options. They find that costs are significant in explaining communities’ choices. In contrast, few of the political variables are statistically significant. These results hold for both waste and recycling, providing further evidence that local governments emphasize costs when choosing between private and public provision.