Fixing big government or feeding private contractors? Empirical evidence from the case of municipal solid waste management

The assumption of new public management (NPM) that governments can lower costs and improve service quality through a market mechanism, such as competition, has been under debate over several decades. To test the NPM assumption, this study investigates the effects of contracting out on cost savings by analysing municipal solid waste management data collected in 25 local governments in the Republic of Korea over a period of 14 years. Contrary to the NPM assumption, this study suggests that contracting out does not necessarily result in cost savings but rather causes additional financial burden on citizens. Points for practitioners: Government officials are strongly encouraged to critically review market-based managerial reforms. Government officials need to assess both benefits and costs of contracting-out practices prior to any outsourcing or privatisation decisions. Government officials need to make evidence-based policy decisions and long-term financial implications from the perspective of citizens.