Introduction
Privatization is a worldwide phenomenon. In recent years all levels of government, seeking to reduce costs, have begun turning to the private sector to provide some of the services that are ordinarily provided by government. The spread of the privatization movement is grounded in the fundamental belief that market competition in the private sector is a more efficient way to provide these services and allows for greater citizen choice. In practice, however, concerns about service quality, social equity, and employment conditions raise skepticism of privatization. In New York State, labor concerns are also a major issue. Although empirical studies do not provide clear evidence on the costs and benefits of privatization, public perception and pressure for improved government efficiency will keep privatization on the government agenda. A review of recent literature on the theoretical and practical debates on privatization follows. A set of links to Professor Warner's research on national and New York State trends is also available on this site.
Click here to view the most Warner team publications on this subject.
Overview
Most privatization research is based on case studies. The following books by E. S. Savas and Elliot Sclar lay out key theoretical and empirical arguments for and against privatization. Proponents argue that private firms are more efficient than government because of economies of scale, higher labor productivity, and fewer legal constraints. He faults government service provision for its monopoly status and inability to be responsive to citizens' needs, resulting in inefficient, one-size-fits-all services. Critics argue that the nature of government services makes many of them inappropriate for privatization. They also point out that contracting may entail hidden costs, because of lack of information, the need for monitoring, and "low-ball" bidding. They note that in some places creating the competition necessary for effective contracting is impossible, and suggest that in practice privatization is more complicated than it seems.
Savas, E. S. 1987. Privatization: The Key to Better Government. Chatham, NJ: Chatham House.
Savas, an advocate of privatization, describes the theory and practice of privatization and alternative service delivery arrangements, illustrating the appropriate use of various privatization techniques.
Sclar, Elliot, 2000. You Don’t Always Get What You Pay For: The Economics of Privatization.
Elliot Sclar lays out and critiques the standard market-based arguments for privatization, using local government case studies. He concludes that advocates of privatization should proceed with caution.
Privatization, first propagated by Margaret Thatcher in 1970, predicted market competition would allow for greater cost-efficiency, increased consumer voice, and enable service integration in the delivery of urban services. In her article, Warner examines these promises of privatization and whether or not they are supported by empirical evidence. She concludes the article by examining the implications of privatization’s actual results for local governance.
Warner, M. E. 2012. “Privatization and Urban Governance: The Continuing Challenges of Efficiency, Voice and Integration,” Cities, 29 (Supplement 2) s38-s43.
Theory - Competition and Competition Critiques
Competition: The theory of privatization is fundamentally based on the notion of competition and the efficiency and choice that it engenders.
Tiebout, Charles 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy 64:416-424.
In this classic article based on public choice theory, Charles Tiebout puts forth a model for determining the optimum expenditure level for public goods. He treats residents as consumers, who “shop around” for the communities that best fit their preferences. The competition among communities forces them to provide public goods at the most efficient level.
Boyne, George A. 1996. "Competition and Local Government: A Public Choice Perspective." Urban Studies 33 (4-5): 703-721. Competition and Local Governance
Bennett, Robert. 1990. "Decentralization, Intergovernmental Relations and Markets: Towards a Post-Welfare Agenda?" Pp. 1-26 in Decentralization, Local Government and Markets: Towards a Post-Welfare Agenda, ed. Robert Bennett. Oxford: Clarendon Press.
This article puts privatization in a theoretical context. Both decentralization and privatization reflect decentralizing trends from state to market and state to local levels of government.
Competition Critiques: Competition is rarely found in markets for public goods because of the fundamental structure of such markets.
Warner, M.E., 2003. "Competition, Cooperation and Local Governance," chapter 19 pp 252-262 in Challenges for Rural America in the Twenty First Century, edited by David Brown and Louis Swanson,
Lowery, David. 1998. "Consumer Sovereignty and Quasi-Market Failure" Journal of Public Administration Research and Theory, pp.137-172.
The intention of quasi-markets is to promote consumer sovereignty and efficient provision of goods and services. Lowery contends that quasi-markets often fail to meet these objectives due to 1) failure of market formation (lack of competition), 2) failure by preference error on the part of consumers and 3) failure by preference substitution (the difference between individual and collective wants). Direct government provision of goods and services, with its hierarchy and bureaucratic controls, may be needed precisely because it is less responsive to market influences.
Sclar, Elliot, 2000. "What’s Competition Got to Do with It? Market Structures and Public Contracting," Chapter 4 of You Don’t Always Get What You Pay For: The Economics of Privatization.
In this chapter, Sclar challenges the argument that privatization creates competition, and therefore efficiency, in the public sector. Due to the nature of public goods, which may be less profitable and more complicated to deliver, most public contracting has no competition (monopoly) or minimal competition among very few firms (oligopoly).
Kodras, Janet. 1997. "Restructuring the State: Devolution, Privatization, and the Geographic Redistribution of Power and Capacity in Governance." pp. 79-96 in State Devolution in America: Implications for a Diverse Society. Ed. Lynn Staeheli, Janet Kodras, and Colin Flint. Urban Affairs Annual Reviews 48. Thousand Oaks, CA: Sage.
Kodras outlines some of the major arguments for and against three methods of changing how government services are provided: privatization, devolution to lower levels of government, and simply abandoning service provision to the nonprofit sector.
Ostrom, Elinor. (2010). "Analyzing Collective Action." Agricultural Economics 41(S1) (November 2010): 155–66.
Ostrom puts forth a theoretical framework that attempts to reconcile rational choice theory with norm-based behavior regarding collective action problems.
Theory - Coasian Bargaining and Transaction Costs
Coasian bargaining creates the potential for market solutions to the provision of public goods. However it raises the issue of transactions costs which may be hard to manage.
Webster, Christopher J. and Lawrence Wai-Chung Lai. 2003. Property Rights, Planning and Markets: Managing Spontaneous Cities. Cheltenham, UK ; Northhampton , MA : Edward Elgar.
This book outlines a theory for the potential of Coasian-style bargaining to work in complex urban contexts. Agglomeration creates catallaxis (knowledge exchange) and new possibilities for spontaneous coordination that do not require government planning.
Webster, Christopher J., (1998). "Public Choice, Pigouvian and Coasian Planning Theory," Urban Studies 35(1):53-75
This article contrasts Pigouvian (welfare) and Coasian economics in the context of planning theory, and gives examples from land-use planning. Webster suggests that Coasian bargaining may provide solutions to the problem of public goods provision.
Staley, Samuel and Lynn Scarlett. 1997. "Market Oriented Planning: Principles and Tools."
The Reason Public Policy Institute promotes market solutions over government regulation. This article provides an example of Coasian bargaining with respect to land use planning. Staley and Scarlet propose changes to current planning processes, to streamline the development process and reduce transaction costs. They argue that in order to accommodate evolving societal land use needs, governments should use market based bargaining procedures that involve only direct stakeholders.
Williamson, Oliver 1999. “Public and Private Bureaucracies: A Transaction Cost Economics Perspective,” Journal of Law, Economics and Organization 15(1):306-342.
Williamson examines public bureaucracy through the lens of transaction cost economics, pointing out that public bureaucracy, like other modes of governance, is well suited to some transactions and poorly suited to others. Williamson claims that there is an efficient place for public bureaucracy, but that each type of governance (markets, hybrids, firms, regulation), has its own place.
Zerbe, Richard O. and Howard E. McCurdy. 1999. "The Failure of Market Failure," Journal of Policy Analysis and Management 18(4):558-578.
Zerbe and McCurdy argue that the case for eliminating market failure through the internalization of externalities is flawed, and that governments should intervene in the marketplace only when they have the ability to lower transaction costs
Sclar, Elliot. 2000. "All in the System: Organizational Theories and Public Contracting," Chapter 5 of You Don’t Always Get What You Pay For: The Economics of Privatization.
Sclar points out that public contracting is difficult and the transaction costs are often quite high.
Hahnel R and Sheeran KA. 2009. "Misinterpreting the Coase Theorem," Journal of Economic Issues. Vol 43. No 1. March. pp 215–238.
The common interpretation of Coase theorem is that markets fail when property rights are poorly defined, and the way to combat this problem is to allow individuals to negotiate among themselves until they reach an ideal solution. This interpretation lends support to a conservative, pro-market view of polluter-victim situations. This article argues that this interpretation of the Coase theorem is essentially incorrect; in fact it misses some of the aspects that Ronald Coase considered key in formulating his idea. Several of his assumptions are ignored in the discourse.
Theory - Political Economic Critiques
Privatization is not only about economics; it is also about politics. Political interest groups play a major role. Privatization also represents an overarching political agenda to alter the relationship between government and citizen.
Feigenbaum, Harvey and Jeffrey Henig. 1994. "The Political Underpinnings of Privatization: A Typology". World Politics 46 (Jan. 1994): 185-208.
The authors discuss the different political lenses through which privatization is viewed. They emphasize pragmatic privatization as a means of cost-cutting, tactical privatization as a way of rewarding allies, and systemic privatization to change institutional structures and societal ideologies. The article primarily focuses on systemic privatization.
Henig, Jeffrey 1989-90. "Privatization in the United States: Theory and Practice." Political Science Quarterly. 104(4):649-670.
Henig traces the development of the theory and the practice of privatization in the United States until 1989-90. He argues that privatization is a new name for an old practice of government contracting. He points to the political nature of the privatization agenda and questions its long term viability.
Starr, Paul. 1987. "The Limits of Privatization." Washington, D.C.: Economic Policy Institute.
This article provides a theoretical critique of privatization and its potential effects on justice, security, and citizenship. Starr also disputes two main arguments of privatization advocates: that with privatization 1) choice will increase and 2) costs will be reduced.
Folbre, Nancy 2001. " Measuring Success," in The Invisible Heart.
Folbre discusses the adverse effects privatization and competitive pressures on the quality of services in care sectors. Standard economic measures used to make privatization decisions fail to accurately assess the real costs and benefits of care.
Kabeer, Nalia. "’Rational Fools’ or ‘Cultural Dopes’? Stories of structure and agency in the social sciences.". Chapter 2 pp16 – 48 in The Power to Chose; Bangladeshi Women and Labor Market Decisions in London & Dhaka,
Kabeer discusses two contradictory positions in social science theory that attempt to explain social and economic change. Neo-classical economics focuses on the individual while structural approaches propose that larger social structures explain human behavior. Kabeer offers a compromise between the two as a better model, using Bangledeshi women in the labor force as an example.
Warner, Mildred E. 2008. "Reversing privatization, rebalancing government reform: Markets, deliberation and planning." Policy and Society 27: 163–174.
Following the emergence of the New Public Management model in the late 20th Century, Warner argues that governments are now seeking a more balanced approach to public service provision by incorporating civic engagement as well as private market dynamics.
Empirical Studies
Trends
Warner, M.E. and Amir Hefetz 2004. "Pragmatism over Politics: Alternative Service Delivery in Local Government, 1992-2002," chapter in The Municipal Year Book 2004.
ICMA has been tracking local governments’ use of alternative service delivery approaches since 1982, finding that privatization trends have actually change little over the years. What has risen most dramatically over the 1992-2002 time period is the use of mixed public/private provision.
Warner, M.E. and Amir Hefetz, 2001. "Privatization and the Market Role of Government," Briefing Paper, Economic Policy Institute,
This article uses national data published by the International City/County Management Association (ICMA) for the period 1982 to 1997 to show that service delivery by public employees remains the dominant form of service provision over the wide range of restructuring alternatives and that privatization has not increased dramatically. It evaluates two theories as to why privatization has not increased: government failure and quasi-market failure.
Greene, Jeffrey D. 1996. "How Much Privatization: A Research Note Examining the Use of Privatization by Cities in 1982 and 1992." Policy Studies Journal 24 (Winter): 632-640.
Green reviews survey results of the International City/County Management Association for 596 cities, between 1982 and 1992, that gauged how much municipalities had privatized and their reasons for privatization. The study used two indicators of privatization, privatization levels, and privatization diversity.
Reviews of Other Studies
Boyne, George A. (1998). "Bureaucratic Theory Meets Reality: Public Choice and Service Contracting in
Statistical methods used in studies cited by public choice theorists lack critical control variables and a reliable measure of competition, and therefore lead to invalid conclusions. Boyne aims to reevaluate the empirical evidence on the effects of service contracting by United States local governments.
Boyne, George A (1998). "The Determinants of Variations in Local Service Contracting: Garbage in Garbage Out?" Urban Affairs Review, Vol. 34, No. 1, pg. 150-163.
Boyne offers an overview of various empirical studies that focus on the determinants of why certain local governments opt to contract out. Boyne aims to answer two questions: 1) To what extent do empirical studies provide an explanation of variations in service contracting? 2) Does the evidence improve our understanding of why different local governments adopt different policies?
Bel, Germà , Xavier Fageda and Mildred E. Warner 2010. "Is Private Production of Public Services Cheaper than Public Production? A meta-regression analysis of solid waste and water services," Journal of Policy Analysis and Management, 29(3): 553-577.
The authors conduct a meta-regression analysis to empirically test if there is systematic support for the claim that private provision of water distribution and solid waste collection services achieves lower overall costs than public provision.
The Contracting Process: Issues surrounding contracting out include the cost of information and monitoring and the need to create a level playing field for competitive bidding between public workers and the private sector. The contracting process is dynamic (contracting out and back in) and requires governments to play a market structuring role.
Hefetz, Amir and M. Warner, 2004. "Privatization and Its Reverse: Explaining the Dynamics of the Government Contracting Process" Journal of Public Administration, Research and Theory, 14(2):171-190. Available here.
This article shows that the level of contracting back in previously privatized services is significant among local governments in the US. A statistical model assessing the reasons for such behavior is presented.
Warner, M.E. with Mike Ballard and Amir Hefetz 2003. "Contracting Back In – When Privatization Fails," chapter 4 pp 30-36 in The Municipal Year Book 2003.
Between 1992 and 1997, the most common forms of alternative service delivery (privatization to for-profits and non-profits and inter-municipal cooperation) increased only slightly. The stability in these trends belies a more dynamic process of contracting out and back in which reflects the key market structuring role played by local governments.
Warner, M.E. and A. Hefetz. 2002 "Applying Market Solutions to Public Services: An Assessment of Efficiency, Equity and Voice," Urban Affairs Review, 38(1):70-89.
The authors assess the efficacy of market solutions for metropolitan public service provision by comparing privatization with inter-municipal cooperation and evaluating each on efficiency, equity and democracy grounds. They find both alternatives promote efficiency, but equity and voice are more associated with inter-municipal cooperation than privatization.
Ballard, Michael J. and M.E. Warner 2000. "Taking the High Road: Local Government Restructuring and the Quest for Quality." Pp 6/1 - 6/53 in Power Tools for Fighting Privatization, American Federation of State, County and Municipal Employees:
Using detailed case studies, this report outlines two alternative strategies for improving local government service delivery—the "high road” which uses new management innovations to increase internal productivity, and the “low road” which focuses on downsizing and contracting out.
Sclar, Elliott. 1997. "The Privatization of Public Service: Lessons from Case Studies."Washington, D.C: Economic Policy Institute.
This article presents several case studies that show public sector employees can provide a more efficient alternative to privatization: the Albany Department of Public Works, highways in Massachusetts, and Indianapolis Fleet Services.
Lehmann, Scott. Privatizing Public Lands. 1995. New York: Oxford University Press.
Lehman takes the special case of public lands and shows the limits of market allocation mechanisms.
Miranda, Rowan and Allan Lerner. (1995). "Bureaucracy, Organizational Redundancy and the Privatization of Public Services." Public Administration Review 55(2): 193-200.
Privatization alone may not lead to better quality or cost reduction in public service delivery. Miranda and Lerner note the relatively high level of mixed (public and private) production for the same service and seek to explain how such redundancy could still be efficient. They argue redundancy can enhance competition, provide a benchmark for costs, and ensure failsafe security in the event of contract failure.
Sclar, Elliot D., K. H. Schaeffer, and Robert Brandwein. 1989. "The Emperor's New Clothes: Transit Privatization and Public Policy." Washington, D.C.: Economic Policy Institute.
This article uses the example of the Urban Mass Transportation Administration, which has mandated state and local transit authorities to privatize their operations, to illustrate that private sector delivery of public goods and services is not nearly as advantageous as its proponents claim.
Moulder, Evelina. 1994. "Privatization: involving citizens and local government employees." Baseline Data Report 26 (1): 1-7.
This article summarizes the results of a survey conducted by the International City/County ManagementAssociation (ICMA) in 1992 on local area alternative service delivery, focusing on the involvement of workers and citizens in decisions to contract for government services.
Pack, Janet Rothenberg. 1989. "Privatization and Cost Reduction." Policy Sciences 22: 1-25.
Pack evaluates the success and sustainability of service cost reduction from the perspective of the economic model of cost minimization through competitive bidding.
Sclar, Elliott, 2009. The Political ‐ Economics of Infrastructure Finance: The New Sub Prime, New York: Center for Sustainable Urban Development, The Earth Institute Columbia University. Click here for full article.
Sclar combines academic literature and case studies to argue that the current Public-Private Partnership model risks undermining the public good aspect of infrastructure provision.
The Reason Foundation, established in 1978, provides excellent materials on privatization (see http://reason.org/areas/topic/privatization). Advocating public policies based upon individual liberty and responsibility and a free-market approach, the Reason Foundation undertakes practical policy research. Their annual year book, Privatization, describes recent developments in privatization, including the following articles.
The Reason Foundation. 1996. "The Politics of Privatization." Privatization 1996. Based on excerpts of several mayors' remarks, this article argues competition is the key to smaller government. The latter part presents the job-loss impact of privatization.
The Reason Foundation. 1997. "Creating the Right Institutions for Competitive Government." Privatization 1997. This article describes how to create a level playing field between in-house public units and outside private providers, called "competitive neutrality," when setting up a public-private competition program.
Geddes, R. (2011). Public Private Partnerships in the Public Interest. In The Road to Renewal (120-136). Washington, D.C.: AEI.
While generally supportive of the use of public-private partnerships in the US transportation sector, Geddes outlines important best practices and policy issues for public-sector officials to consider before entering into a PPP contract. According to Geddes, it is important to develop the appropriate “infrastructure of an institutional nature” in order to successfully benefit from these types of partnerships, as their initiation, negotiation, and management can be particularly complicated.
Ashton, P., Doussard, M., and Weber, R. 2012. "The Financial Engineering of Infrastructure Privatization." Journal of American Planning Assocation, 78(3):300-312.
There has been great debate as to why public sector entities so often undervalue what a project will be worth long-term to a private buyer. Some indicate the public sector understands how asset valuation is done but fails to account for private sector desire to garner first mover advantage in a new market. Others think the public sector lacks the information and the means to control the underlying drivers of asset value. Ashton et al. take these hypotheses further. In this paper, they propose the structured financial techniques (specifically debt swaps, sweeps, and raising internal valuations) used by private investors alter revenue estimates favorably for investors and lead to bid inflation. The research suggests a presence of informational asymmetries and structural power imbalances within the bargaining context. The authors use the examples of the Chicago Skyway and parking meter privatization to show how this happens in real-world situations.Regional Differences
Warner, M.E. and A. Hefetz. 2003. "Rural-Urban Differences in Privatization: Limits to the Competitive State," Environment and Planning C: Government and Policy 21(5): 703-718.
Despite two decades of experience with privatization, US local government use of contracting in public service delivery remains relatively flat. Market approaches to public goods provision emphasize the competitive state, and attribute limited degree of privatization to bureaucratic resistance. Rural development theory emphasizes the uneven impact of market solutions in rural communities. Using national data on US local government service delivery from 1992 and 1997, we analyze differences in local government service-delivery patterns by metropolitan status. Discriminant analysis suggested that structural features of markets are more important than the managerial capacity of government leaders in explaining lower rates of privatization among rural governments. These structural constraints limit the applicability of competitive approaches to local government service delivery. Our results suggest that cooperation, as an alternative to privatization at the local level and as a source of redistributive aid at the state level, may provide a more equitable alternative for disadvantaged rural communities.
Warner, M.E. and A. Hefetz. 2002. "The Uneven Distribution of Market Solutions for Public Goods," Journal of Urban Affairs, 24(4): 445-459.
Using national data on local government service delivery from 1992 and 1997, this article assesses the distribution of privatization and inter-municipal cooperation across localities in the metropolitan region and finds them most common among suburbs.
Contracting Back In
While privatization is the most popular form of alternative local government service delivery, longitudinal analysis shows these contracts are not stable over time. Using ICMA data we can track the dynamics of local government contracting. We find contracting back in (or reverse privatization) is growing in importance. For more discussion of this phenomenon see, Hefetz and Warner 2004 Privatization and its Reverse. For a more descriptive account with case studies, see Warner and Hefetz 2001 Privatization and the Market Structuring Role of Local Government.
Why are contracts unstable?
Also see Ballard and Warner 2000 Taking the High Road: Local Government Restructuring and the Quest for Quality for an analysis of case studies which show why governments bring the work back in. You may also search our online database of case studies of contracting back in.
New York State
Warner, M.E. and Robert Hebdon. 2001 "Local Government Restructuring: Privatization and Its Alternatives," Journal of Policy Analysis and Management 20(2):315-336.
Rather than treating public and private provision of public goods and services as a strict dichotomy, a 1997 survey of chief elected township and county officials in New York shows local governments use both private and public sector mechanisms to structure the market, create competition and attain economies of scale. In addition to privatization and inter-municipal cooperation, two alternative forms of service delivery not previously researched, reverse privatization and governmental entrepreneurship, are analyzed.
Warner, M.E. 2000. "Structuring the Market for Service Delivery: A New Role for Local Government." pp 85-104 in Local Government Innovation: Issues and Trends in Privatization and Managed Competition, Robin Johnson and Norman Walzer eds.
Case study analysis of reverse privatization among New York State towns and counties shows how governments engage the market to ensure competition, control and attention to community values. The nature and relative importance of three alternatives to privatization – inter-municipal cooperation, reverse privatization and governmental entrepreneurship are described.
Warner, M.E. and R. Hebdon "Local Government Restructuring in New York State: Summary of Survey Results"
Restructuring in New York State primarily involves public sector innovation rather than privatization. Intermunicipal cooperation was the predominant form of restructuring, while privatization was the second most common form of restructuring. Significant levels of reverse privatization and governmental entrepreneurship were also found. Incidence of restructuring was highest among counties, and in the following service areas: public works, public safety, and general governmental support functions.
Search the database of case studies on local government restructuring in
Hebdon, Robert, and Hazel Dayton Gunn. 1995. "The Costs and Benefits of Privatization at the Local Level in New York State." Community Development Report.
Hebdon and Gunn provide a brief overview of the privatization debate, at the level of local service delivery.
Savas, E. S., ed. 1992. Privatization for New York: Competing for a Better Future. The Lauder Report; A report of the NYS Senate Advisory Commission on Privatization. New York.
This volume provides a review of experiences with privatization in New York State and recommendations for expanding its use, from a proponent's perspective. It also introduces the experiences of other states and cities, and the special experiences gained in Britain.
Labor and Legal Concerns
Labor
Another major issue is the impact of privatization on job security and employment. Proponents claim that public sector workers are not harmed by privatization. Displaced workers can be hired by contractors or transferred to other government positions. Organized labor, however, is very concerned about layoffs, erosion of wages and benefits, and decreased levels of union membership with privatization. Empirical studies show that privatization has not had a major impact on wages and working conditions (Pendleton 1997), but it can have significant effects on labor relations (Hebdon 1995). Opponents present case studies that show public sector employees can provide more efficient alternatives to privatization (Sclar 1997). The expertise and experience of many government employees may make them better at providing government services, and management techniques like total quality management are making the public sector more efficient.
Chandler, Timothy, and Peter Feuille. 1994. "Cities , Unions, and the Privatization of Sanitation Services." Journal of Labor Research 15 (1): 53-71.
This article analyzes the relationship between unionization and government decisions to contract out sanitation services using a conceptual framework that emphasizes political considerations.
Chandler, Timothy, and Peter Feuille. 1991. "Municipal Unions and Privatization." Public Administration Review 51 (1): 15-22.
The authors examine the impacts of unionization on local governments' decision to contract out sanitation services, based on a survey of 1,541 municipalities between 1973 and 1988.
Hebdon, Robert. 1995. "Contracting Out in New York State: The Story the Lauder Report Chose Not to Tell." Labor Studies Journal (Spring): 3-29.
The author sees privatization as a disruptive, harmful way of cost saving. Examining the history of collective bargaining in New York State, he emphasizes the negative impact of privatization on unions and workers.
Pendleton, Andrew. 1997. "What Impact Has Privatization Had on Pay and Employment:A Review of the UK Experience." Industrial Relations 52 (3): 554-579.
The article analyzes the theoretical and actual impact of privatization on labor conditions in the United Kingdom. The article concludes privatization does not have a consistent and strong effect on pay and employment.
Donovan, Ronald, and Marsha J. Orr. 1982. "Subcontracting in the Public Sector: The New York State Experience."
The authors examine subcontracting out transportation services in school districts in New York State. They propose a list of standards to judge when subcontracting should be subject to negotiation and arbitration.
Legal
Legal concerns beyond labor issues are also important considerations in privatization. Legal debate starts from the argument that the public and private sectors are essentially different and their separate functions can be logically designated. The following articles raise concerns about constitutional protections of citizens and emphasize the legal characteristics of public entities. Opponents worry that privatization may threaten citizens' constitutional rights.
Moe, Ronald C. 1987. "Exploring the Limits of Privatization." Public Administration Review 47 (Nov/Dec): 453-460.
This article argues the most important distinction between private and public entities lies in the concept of sovereignty that inheres in the public sector, giving it rights and immunities that the private sector does not, or at least ought not, possess.
Sullivan, Harold J. 1987. "Privatization of Public Services: A Growing Threat to Constitutional Rights." Public Administration Review 47 (Nov/Dec): 461-467.
This article reviews the judicial decisions concerning the scope and applicability of national constitutional protections on privatization. It also examines and identifies a number of arrangements between government and private service providers that immunize both the government and private entities from constitutional restraints.
Starr, Paul. 1987. "The Limits of Privatization." Washington, D.C.: Economic Policy Institute.
This article provides a theoretical critique of privatization and its potential effects on justice, security, and citizenship. Starr also disputes two main arguments of privatization advocates: that with privatization 1) choice will increase and 2) costs will be reduced.
Gerbasi, Jennifer and M.E. Warner, June 2003. "The Impact of International Trade on State and Local Government Authority," Dept. of City and Regional Planning Working Papers #204.
Free trade has been pursued to expand markets and create jobs. However, the new trade agreements (NAFTA, WTO, FTAA, GATS) reach beyond traditional customs and tariff regulations and impacts all government activity that may affect foreign trade. There is some concern in the governance community that these changes may lead to federal preemption of traditional powers reserved to states and localities.
Warner, Mildred and Jennifer Gerbasi. "Rescaling and Reforming the State under NAFTA: Implications for Subnational Authority." International Journal of Urban and Regional Research December 2004 Vol 28(4): 853-73.
This paper describes the new governance features of the North American Free Trade Agreement (NAFTA) and illustrates how they work out at the national, subnational and local scales using cases from the United States and Mexico. The authors show how NAFTA’s governance structure is undermining subnational and local government authority in legislative and judicial arenas.
Gerbasi, Jennifer and Mildred Warner. 2004, "Is There a Democratic Deficit in the Free Trade Agreements? What Local Governments Should Know," Public Management 86:2 (16-21).
Gerbasi, Jennifer and Mildred E. Warner. 2007. "Privatization, Public Goods, and the Ironic Challenge of Free Trade Agreements," Administration & Society, 39(2): 127-149.
Gerbasi and Warner give a critical examination to major free trade agreements, highlighting the risk they pose to local regulatory power, legal processes, and traditional methods of dispute resolution.
International Experience
Kohl, Benjamin, 2004. "Privatization and Regulation: A cautionary tale from
Kohl uses the Bolivian experience with privatization to illustrate the limitations of privatization in developing countries.
Shughart, William F. II 1999. "Interest Group Theory of Government in Developing Economy Perspective," in Institutions and Collective Choice in Developing Countries ed by Mwangi Kimenyi and John Mbuku.
This paper outlines the interest group or the ‘capture’ theory of government: the same behavioral assumptions of maximization of self-interest that explain decision-making of the market can be used to explain the behavior of public policy makers.
Graham, Carol. 1998. Private Markets for Public Goods: Raising the Stakes in Economic Reform. Washington DC: Brooking Institute Press.
In this book, Graham examines the use of markets to increase the efficiency of the public sector. She uses case studies of Chile, Peru, Bolivia, Czech Republic and Zambia to assert that private market incentives such as competition and choice strengthen participation and improve performance.
Schick, Alan (1998). "Why Most Developing Countries Should Not Try
New Zealand’s government agencies are run by independent public managers who contract out most services and are monitored for accountability. Schick’s article looks at New Zealand’s system, both the benefits and cost, and finds reason that this system would not work for developing countries with large informal economies.
Clifford Wirth, "Transportation Policy in Mexico City: The Politics and Impacts of Privatization" Urban Affairs Review, Vol. 33, No. 2, November 1997, pp. 155-181.
In this article, Wirth challenges the idea that privatization occurs only when public sector responsibilities are shifted to private providers. He advocates a cost-benefit analysis that includes social and environmental externality costs and claims that local government officials should be accountable for both the decisions they choose to take and the one they refuse to make.
Miraftab, Faranak (2004). "Neoliberalism and Casualization of Public Sector Services: The Case of Waste Collection Services in Cape Town, South Africa," International Journal of Urban and Regional Research, 28(4): 874-892.
By presenting a series of cases regarding waste collection privatization in post-apartheid South Africa, Miraftab shows how privatization of basic public services can have severe consequences with respect to gender and race.
Miraftab, Faranak (2004). "Public-Private Partnerships: The Trojan Horse of Neoliberal Development?," Journal of Planning Education and Research, 24(1): 89-101.
Governments in developing countries have adopted public-private partnerships (PPPs) approach where partnerships between communities and private sector are mediated by the government to take advantage of/ overcome shortcomings of both market and community based approaches. Miraftab argues that the inequitable outcomes resulting from PPPs cannot be solved by focusing on their technical planning and execution aspects alone. The larger policy context determines the state’s will and capacity to intervene with a redistributive agenda and steer the partnership towards equity by building capacities of individual partners, especially the grassroots. In addition to elite interests and macro-level policies, strong social movements also have potential to pressurize the state to play an effective regulatory role. In the absence of state intervention, PPPs might fail to serve the interests of the disadvantaged.
Miraftab, Faranak (2009). "Insurgent Planning: Situating Radical Planning in the Global South," Planning Theory, 8(1): 32-50.
Miraftab uses South Africa’s Western Cape Anti-Eviction Campaign as a lens through which to examine two current issues of concern to planning scholars: 1) what the implications for radical planning may be of what she calls “grassroots insurgent citizenship”; and, 2) whether conventional planning theory, which “universalizes the metropole,” can be de-“colonized.”
O’Neill, Phillip. (2010). "Infrastructure Financing and Operation in the Contemporary City," Geographic Research 48(1):3-12.
Using Australia as a backdrop, O'Neill argues that unregulated privatization undercuts many of the broad social benefits brought about by public infrastructure provision.
Davis, Mike. 2006. Planet of Slums. London: Verso.
Davis describes the growing global presence of the urban slum. In particular, his book examines the impact of increasing globalization, neoliberal structural adjustment policies, and state-sponsored initiatives in fostering the rapid rise of slums, as well as their economic, environmental, and humanitarian consequences.
Graham, Stephen and Simon Marvin. 2001. Splintering Urbanism: Networked Infrastructures, Technological Mobilities, and the Urban Condition. London, UK and New York, NY: Routledge.
Cities are comprised of a complex web of interwoven infrastructure systems that structure social, economic, and environmental interactions. Graham and Marvin dissect the theoretical concepts surrounding these systems, their historical composition, and their resultant social and economic effects. The authors also present a series of case studies that illustrate the continuing unbundling of these networks in practice.
Canadian Council for Public/Private Partnerships, 1996. National Opinion Research. Toronto.
The Canadian Council for Public/Private Partnerships surveyed over 200 governments across Canada to assess: 1) current partnership activities, 2) planned partnership activities, 3) perspectives on partnerships and, 4) support for implementing partnerships.
Clifton, J (2010). "The Political Economy of Telecoms and Electricity Internationalization in the Single Market," Journal of European Public Policy, 17(7), 988-1006.
Clifton explores the relationship between domestic liberalization policies and incumbent (i.e. large companies with dominant market shares) internationalization for telecommunications and electricity multinationals in Europe. Liberalization policies encouraged by the European Commission have corresponded with many domestic incumbents becoming dominant multinational corporations. However, the exact relationship between liberalization and internationalization remains disputed.
Ramamurit, Ravi (1999). "Why Haven't Developing Countries Privatized Deeper and Faster?," World Development, 27(1):137-155.
Ramamurti states that he shares theWorld Bank’s belief that “privatization is a powerful and positive idea.” However, in this 1999 article, he responds to and systematically dismantles the arguments of a 1995 World Bank study entitled Bureaucrats in Business, which laments the continued prevalence of State Owned Enterprises (SOEs).
Florio, M. (2013). Network Industries and Social Welfare: The Experiment that Reshuffled European Utilities. Oxford University Press, USA.
Florio challenges the dominant paradigm that liberalization of network industries in Europe in the last two decades has produced socially efficient outcomes by posing three research questions: (1) whether ownership matters for pricing and social welfare; (2) whether vertical disintegration is a condition for obtaining competitive prices; and (3) whether competition actually leads to lower prices to consumers. The author addresses these questions by assessing (a) the results of liberalization in telecommunication, electricity, and natural gas, and (b) consumers’ perception concerning quality and affordability of these services.
Special Projects
Gratto, Andre, Bryan Preston, and Thor Snilsberg. Mitigating Corruption in New Public Management. Ithaca NY: Cornell University Department of City and Regional Planning.
This article provides an environmental framework for reducing potential for corruption.
McFarland, Stephen, Chris McGowan and Tom O’Toole (2002). "Prisons, Privatization and Public Values."
Warner, Mildred, James Quazi, Brooks More, Ezra Cattan, Scott Bellen and Kerim Odekon (2002) Business Improvement Districts: Issues in Alternative Local Public Service Provision.
Transfer of Development Rights Programs: Using the Market for Compensation and Preservation (2002). Jason Hanly-Forde, George Homsy, Katherine Lieberknecht, Remington Stone. This article reviews the challenges to Coasian bargaining solutions for planning.
Dowd, Kevin M. 2011. "The Nebulous Role of the Modern Redevelopment Authority: Public Purpose, Private Purpose, or Something in Between?" Cornell University Department of City and Regional Planning.
This article presents a discussion of the historical evolution of the social, legal, and market factors that have affected the efficacy of the redevelopment authority model in the US.
Knipe, Tom. 2011. "Bed Taxes and Local Tourism Development: An Outline and Annotated Bibliography." Cornell University Department of City and Regional Planning.
This paper presents an outline and comprehensive annotated bibliography regarding the impact of hotel taxes on the local tourism industry.
Community Land Trusts: An Analysis of CLTs in Three Housing Markets. (2011). Rebecca Baran-Rees, Nathaniel Decker, Kevin Dowd, Tom Knipe, C.J. Randall, and Janani Rajbhandari Thapa.
This paper addresses the varying challenges and opportunities of CLTs in three different housing market typologies.