Applying Market Solutions to Public Services

Abstract

Political fragmentation in metropolitan regions makes equitable and efficient delivery of public services difficult. Regionalism, although promoted as more equitable and rational, has found limited political support. Public choice theory argues, against regionalism, that political fragmentation can promote competition and efficiency by creating markets for public services. The authors assess the efficacy of market solutions for metropolitan public service provision by comparing privatization with intermunicipal cooperation and evaluating each on efficiency, equity, and democracy grounds. Using probit regression analysis of a national survey of local government service delivery from 1992 and 1997, the authorsfind that both alternatives promote efficiency, but equity and voice are more associated with intermunicipal cooperation than privatization.