Good to share? The pecuniary implications of moving to shared service production for local government services
| DOI | http://doi.org/10.1111/padm.12575 |
| Date | 01 March 2019 |
| Published date | 01 March 2019 |
ORIGINAL ARTICLE
Good to share? The pecuniary implications of
moving to shared service production for local
government services
Joseph Drew
1
| Dana McQuestin
1
| Brian E. Dollery
2
1
Institute for Public Policy and Governance,
University of Technology Sydney, Ultimo,
New South Wales, Australia
2
School of Economics, University of New
England, Armidale, New South Wales,
Australia
Correspondence
Joseph Drew, Institute for Public Policy and
Governance, University of Technology Sydney,
Broadway, Ultimo, New South Wales 2007,
Australia.
Email: joseph.drew@uts.edu.au
Shared services are often lauded as an efficacious means of reduc-
ing municipal expenditure and thereby improving waning financial
sustainability. However, most of the extant theoretical and empiri-
cal work only considers costs and benefits at the level of the spe-
cific service in question and, hence, fails to capture many of the
wider benefits and costs that might accrue to local governments. In
this article we first build a schema to illustrate the benefits and
costs of moving from separate to collaborative production at the
level of individual local authorities. We then test two hypotheses
drawn from the schema against a five-year panel of expenditure
data. We find evidence of increased expenditure in the order of
8 per cent that prima facie runs counter to the objectives of many
municipal managers engaged with shared services. We conclude by
considering the implications of our findings for cooperative ven-
tures between local authorities.
1|INTRODUCTION
Numerous reasons have been tendered for why shared provision of local government goods and services might be
preferred over other production arrangements (Tomkinson 2007). For instance, it has been argued that shared ser-
vices may facilitate more coherent regional planning (Kim and Warner 2016), deliver improvements to service quality
(Aldag and Warner 2018), promote innovation (Carr and Hawkins 2013), reduce professional isolation and address
recruiting difficulties relating to managerial and technical expertise, especially in rural areas (Bel and Warner 2015;
Dollery et al. 2016). Shared services have also been cited as a mechanism for internalizing externalities (whereby pro-
vision of a service in one local government area might generate positive or negative side-effects in neighbouring
municipalities) (Kwon and Feiock 2010).
However, the most common rationalization for shared service arrangements rests on the assertion that collabo-
rative ventures will result in reduced expenditure (Dollery et al. 2016). This motivation has become particularly
important given the austerity measures imposed by many national governments in the wake of the global financial
crisis (Aldag and Warner 2018). Furthermore, a belated realization that municipal mergers have proved largely
Received: 11 May 2018 Revised: 17 September 2018 Accepted: 12 November 2018
DOI: 10.1111/padm.12575
132 © 2018 John Wiley & Sons Ltd wileyonlinelibrary.com/journal/padm Public Administration. 2019;97:132–146.
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