Reexamining the Relationship Between Fiscal Stress and Outsourcing

ABSTRACT

The determinants of outsourcing in local government are widely studied from a variety of frameworks. One concept consistently used to explain local government outsourcing is fiscal condition, with many noting that outsourcing is more likely when a local government’s fiscal condition declines into fiscal stress. Despite the ubiquity of this expectation in the outsourcing literature, several articles reviewed suggest that the findings for this relationship remain uncertain. As a result, the research presented in this article sought to examine and extend what is known about the relationship between fiscal stress and outsourcing in U.S. municipalities. The research includes previous measures of fiscal stress and adds new measures. In addition, it tries to overcome the limited theoretical testing of the relationship between fiscal stress and outsourcing by examining both direct and indirect effects of fiscal stress on outsourcing. It finds that municipalities in the United States that are experiencing fiscal stress are more likely to engage in outsourcing, particularly municipalities that are experiencing fiscal stress and have a positive evaluation of the external market to provide services.

KEYWORDS:

• fiscal stress
• outsourcing
• service provision

Additional information

Notes on contributors

Zhiwei Zhang

Zhiwei Zhang is an Assistant Professor at Kansas State University.

Bryan Gibson

Bryan Gibson is a Research Program Manager at the Kentucky Transportation Center.

Josephine Gatti Schafer

Josephine Gatti Schafer is an Assistant Professor at Kansas State University.