Factors Important in Local Governments' Privatization Decisions

Abstract

In this article, the author builds a model of local governments' decisions to contract out residential solid waste disposal services and empirically tests this model by using a new dependent variable—proportion of expenditures on a service that goes to expenses other than payroll. The important factors affecting the contracting-out decision are scale economies, nonproperty taxes, difference in private- and public-sector unionization rates, and income and bond rating, in that order. Political and ideological factors appear to be less determinative than economic considerations.