This paper investigates the effect of government outsourcing by considering how outsourcing decisions are determined along two dimensions: (i) cost differences between private firms and government suppliers of public goods and (ii) dynamics arising from cost complementarities and capacity constraints. I formulate and estimate a dynamic binary choice model of government outsourcing using project-level data from the dredging industry. Model estimates indicate substantial cost savings due to outsourcing but also that government presence in the market yields cost reduction. A counterfactual policy featuring direct competition between government and private sector firms finds a total expenditure reduction of 17.1 percent.

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Presented by Aaron Barkley, University of Melbourne.

Further information

While at The University of Queensland, Dr Aaron Barkley will be using room 520A Colin Clark building. If you would like to meet with him or have lunch or dinner with him please contact Dr Fu Ouyang who will be his host while at The University of Queensland.  Dr Ouyan can be contacted on f.ouyang@uq.edu.au.

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Colin Clark building (#39)
The University of Queensland
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