Association for Public Policy Analysis & Management

Contracting out has become an increasingly utilized mode of service delivery at all levels of government because it is supposed to reduce costs, increase efficiency, improve quality, and enhance responsiveness. In the meantime, many scholars have presented concerns that entrepreneurialism deeply rooted in New Public Management and Reinventing Government poses a threat to democratic rules and fails to account for critical differences between the government and private sectors, and ignores the constitutional premise that government is based on a rule of law and not market-mechanisms. Are market-oriented administrative reforms always detrimental to democratic values? More specifically, can contracting out espouse equity beyond market-driven values? Since Boyne (2002) has identified five themes of performance in public organizations including outputs, efficiency, effectiveness, responsiveness, and democratic outcomes, the final group of measures have not been captured in empirical studies in part due to measurement issues. This paper aims to contribute to evidence regarding the effect of contracting out on equity in property assessment by drawing on data from Virginia cities and counties during the 2005 to 2014 time periods. The Virginia Department of Taxation conducts a sales ratio study on an annual basis for each jurisdiction and computes a price-related differential index score that reflects the area’s level and nature of vertical inequity. The panel data analyses indicate that assessment practices that differ between jurisdictions are important determinants of vertical equity, and especially, contracting out in mass appraisal significantly raises vertical inequity while contracting out in maintenance appraisal reduces the outcome noticeably.