Association for Public Policy Analysis & Management

This article extends analysis of the financial impacts of the Great Recession to focus on changes in municipal service provision arrangements. An emergent line of research explores the effects of the economic downturn on local government taxing policy. This paper extends the research with a focus on the manner in which changing economic circumstances spur adoption of service provision reforms such as co-production, contracting in or out, or privatization. Moreover, the research on municipal service provision has been too reliant on cross-sectional analysis, having produced relatively few studies examining changes in contracting or other service arrangements over time (Boyne, 1998; exceptions include Lamothe et. al., 2008; Joassart-Marcelli and Musso, 2005). The article improves our understanding of the political economy of service provision through an empirical consideration of the impact of the Great Recession on service provision arrangements in California.

Through the combination of rich and nuanced panel data from the public and private sectors on cities in the State of California spanning over fifteen years, we examine city structuring of service provision arrangements, including the utilization of volunteers as well as the share of staff for a given service that are volunteers relative to paid. To correct for selection bias in the dependent variable for service provision type we use a panel probit model with random effects. This approach is identified in Wooldridge (1995; 2010) and is shown to be more robust than maximum likelihood estimations or other approaches that require more stringent assumptions about unobserved characteristics. The results will illustrate how the institutional arrangements of service provision respond to fiscal shocks, providing some evidence regarding the extent to which they may be part of a fiscal sustainability agenda.