Insourcing public services: Consequences for wages and employment

Abstract

AbstractAfter decades of private companies delivering public services, governments are increasingly using a mix of outsourcing and insourcing to provide services. With insourcing, governments replace market competition with public monopoly and concentrated private ownership with more dispersed public ownership. Despite these fundamental changes in competition and ownership, little is known theoretically and empirically about how insourcing affects employees. This study uses high‐quality, individual‐level Danish register data to examine how insourcing affects employees overall and among employees of different gender and age. The analysis shows that insourcing significantly and positively affects short‐ and intermediate‐term work income and employment. Moreover, moderation analyses suggest that insourcing is particularly beneficial for female, younger, and older employees. These findings have important implications for policy makers, as they provide insights into longstanding questions about insourcing in public administration and reveal how estimating total insourcing costs should include employee consequences, especially for female and younger/older employees.