Why Do Local Governments Resist Contracting Out?

Local governments are reluctant to contract out public services. This paper shows that resistance to contracting out is not at odds with efficiency. The sample includes all 135 municipalities that were distributing gas in an Italian region when a national reform ended in-house delivery. Contracting out decisions have been analyzed for the subsequent 12 years through a duration model that admits time dependence and interaction with inter-municipal cooperation. It has been found that opposition to service outsourcing is more likely if scale and managerial efficiency have already been enhanced. Fiscal stress and the activism of citizens are shown not to play a significant role