Can Politics Explain Contracting Out?

The theoretical literature suggests that political ideology matters in the decision to contract out public sector services, whereas the empirical literature is divided. We seek to explain the divide in the empirical literature by providing a link from theory to our empirical analysis by describing the nature of political competition. Using the number of seats in English local government as a measure of political ideology, we find that those governments dominated by Conservative party members have a higher likelihood of contracting out, whereas the opposite is true for the Greens. We also investigate the marginal effect of a Conservative seat. Our results suggest that local governments are more likely to contract out waste management and recycling services, the greater the number of seats that are controlled by the right-wing party (Conservatives). However, an additional Conservative seat seems to have a stronger positive influence when one of the other opposition parties (the Liberal Democrats) is controlling the local legislature rather than the Conservative themselves.