2003 Jun Brown and Potoski Transaction Costs and Institutional Explanations for Government Service Production Decisions
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Transaction Costs and Institutional Explanations for Government Service Production Decisions

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Governments not only choose which services to deliver to citizens, but they also choose how to deliver those services. Governments can produce services themselves or through a variety of external production mechanisms, including contracting with other governments, private firms, and nonprofits. In this article, we apply a transaction cost framework complemented with institutional and market theories to examine governments’ service production decisions. Our analyses of a 1997 International City/County Management Association survey shows how governments choose service production mechanisms to manage the transaction costs inherent in delivering different types of services.