Resumen de Modeling Fiscal Stress and Contracting Out in Local Government: The Influence of Time, Financial Condition, and the Great Recession

Antonio Manuel López Hernández , José Luis Zafra Gómez , Ana María Plata Díaz

• Various studies have analyzed the relationship between fiscal stress and contracting out, but have failed to achieve conclusive results. In this article, we take a broad view of fiscal stress, addressed in terms of financial condition and studied over a lengthy period (2000-2010). The relationship between fiscal stress and contracting out is studied using a dynamic model, based on survival analysis, a methodology that enables us to take into account the effect of time on this relationship. As this study period includes the years of the Great Recession (2008-2010), we also highlight the impact of this event on the fiscal stress–contracting out relation. The results obtained suggest that taking into account the passage of time and conducting a long-term assessment of financial condition enable a more precise understanding of this relation. We also find that the Great Recession reduced the probability of local governments’ contracting out public services.