What elements of financial stress affect contracting out and intermunicipal cooperation in the provision of local public services? The impact of the great recession
José Luis Zafra Gómez, Juan Sánchez Fernández, Ana María Plata Díaz and Gemma Pérez López
The current financial crisis is one of the main factors underlying proposals made for change delivery form of municipal services. However, this situation is affected by a wide variety of financial indicators, and it is necessary to determine which of these indicators have greatest influence on decisions regarding outsourcing or long-term inter-municipal cooperation. Furthermore, the Great Recession could have modified these financial indicators, and so we must identify which of them impacted on public-service outsourcing and/or cooperation both before and during the crisis. This paper evaluates these factors with respect to a sample of Spanish municipalities, for the periods 2002-2007 and 2008-2010, via a discriminant analysis. The results obtained show that the financial indicators that affect outsourcing and cooperation are different, specifically, we find that the variables which are related to spending on transfers, budget sustainability and the flexibility of the entity, measured by its outstanding debt have the greatest impact on the outsourcing process, while the cooperation processes are influenced, in addition to the latter factors, by the short-term solvency of the entity. The elements of short term solvency, flexibility and sustainability led municipalities to outsource their public services in the pre-crisis period, while only debt and financial independence influenced the cooperation decisions during the crisis period.
- Financial stress
- Contracting out
- Intermunicipal cooperation
- Great recession
- Local government