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Warner, M.E. and Amir Hefetz, 2001. "Privatization and the Market Role of Government," Briefing Paper, Economic Policy Institute, Washington, DC.

Using longitudinal data from 1982 to 1997, we show that the local decision to provide public services is complex and dynamic. Local governments use a range of service restructuring alternatives including privatization, mixed public/private provision and cooperation between governments. Service delivery is a dynamic process reflecting changing citizen demand for services and new privatization. The data also show significant instability in contracts, including contracting in - the reverting back to public provision of previously privatized services. This "reverse privatization" may reflect problems with the contracting process itself, limited efficiency gains, erosion in service quality or concern over the loss of broader community values associated with public service delivery. Privatization does not imply a retreat of government but rather a more active engagement with the market. Whether as regulator, contractor or direct service provider, local governments manage markets to create competition and ensure service quality and stability. This pragmatic market structuring role is critical to ensure that both efficiency and the broader public benefits of service delivery are achieved.

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Subject: Privatization