Bureaucratic theory meets reality: Public choice and service contracting in US local government

Empirical studies suggest that local service contracting lead to higher efficiency, which seems to support public choice arguments an the vices of municipal monopoly and virtues of competition. A methodological critique of the evidence shows that these conclusions are not valid. Major deficiencies of the statistical tests include the omission of relevant control variables and the absence of measures of competition. Implications for the theory and practice of public administration are identified.