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The impact of government outsourcing on public spending: Evidence from European Union countries

José M. Alonso, Judith Clifton and Daniel Díaz-Fuentes ()

Journal of Policy Modeling, 2017, vol. 39, issue 2, 333-348

Abstract: Reducing public spending was a major objective when governments across Europe increasingly turned to outsourcing as a mode of public service provision from the 1980s. Today, despite its prevalence, there is still little consensus in the literature on whether outsourcing is an effective policy as regards reducing spending. Using a panel data model for 25 European countries over the period 1990–2011, this article tests whether outsourcing actually led to a reduction in public spending. Results indicate that outsourcing failed to reduce government expenditures at the central government level. This finding persists even after controlling for expenditure dynamics and addressing potential endogeneity issues.

Keywords: Outsourcing; Government expenditure; Panel data; Europe (search for similar items in EconPapers)
JEL-codes: C23 H10 H50 L33 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:jpolmo:v:39:y:2017:i:2:p:333-348