Do local authorities use NPM delivery forms to overcome problems of fiscal stress?

Abstract

Finding solutions to the unfavourable economic and financial situation that the local authorities are currently facing is of crucial importance. One such solution is to adopt mechanisms for restructuring local public services, through new management approaches to reduce costs and thereby reduce fiscal stress. The aim of this article is to determine the probability of a city council changing the way it manages services, selecting from different options, in response to situations of fiscal stress. To address this issue, we studied a sample of 1572 Spanish municipalities for the period 2002–2009, using a random-effects panel multinomial logit model. The results obtained show that outsourcing and inter-municipal cooperation are the management formulas that councils are most likely to choose in response to a financial crisis, especially the ones arising from insufficient transfers, negative cash flow, debt or budget deficit.