New Forms of Local Governance

Abstract

This article seeks to identify which factors lead local governments to use corporate public sector organizations, particularly municipal corporations, for service delivery. The authors argue that local officials trade off bureaucratic costs of in-house production with agency costs of external delegation to municipal corporations when deciding how to deliver local public services. Econometric models are employed to test this explanation for the adoption of municipal corporations by 278 Portuguese local governments. The results indicate that organizational size, financial independency and fiscal surplus, as well as ideological concerns and the activity of local interest groups, drive choices of local governance structures.

Key words:

• Governance structures
• municipal corporation
• public authority
• service delivery
• transaction costs

Notes

Portuguese municipal corporations have many institutional features in common with what the Anglo-Saxon literature identifies as public authorities (Gulick 1947; Sbragia 1996; Frant 1997; Bourdeaux 2005). Throughout this article we employ the concepts interchangeably.

The local corporate public sector includes all forms of organizations involving a majority of public capital, namely municipal corporations, stock companies, public foundations and co-operatives.

Judicial branch organization that inspects and evaluates the legality and conformity of public budgeting and spending practices producing decisions valid for all public organizations.

The provision choice relates to the decisions about what services to provide, quality standards of those services and the criteria for raising revenue. Production, on the other hand, refers to the technical aspects of arranging resources to manufacture a product or deliver a service (Parks and Oakerson 1989).

The most prevalent are solid waste, water supply, public parking and affordable housing.

We also tested this hypothesis using a set of three dummy variables representing the four political parties. The results are consistent with the findings reported here.

The different specifications were not included here due to space limitations but will be made available upon request to the authors.