Political ideology, regulatory framework and contracting out

Abstract

The influence of political ideology on make-or-buy choices for public provision has been a subject of intense debate from various theoretical perspectives, but the empirical evidence so far has been mixed. This paper delves into this issue by using a regression discontinuity (RD) design to examine the effect of mayoral ideology on contracting-out and public-sector outsourcing in Brazil, a country with broad constitutional guarantees and intergovernmental transfers for local public service provision. We estimate no ideological effect on contracting-out healthcare facilities, early-childhood schools or in outsourcing of the public workforce. Constraints on local regulatory and fiscal autonomy in local public services, coupled with a lack of strong ideological alignment between parties and candidates, curtail partisan differences in decisions whether to procure or provide services in-house.