Cost and Efficiency in Government Outsourcing: Evidence from the Dredging Industry

This paper investigates the how government outsourcing affects efficiency and expenditures by considering decisions are determined along two dimensions: (i) cost differences between private firms suppliers of public goods (ii) dynamics arising from complementarities capacity constraints. I formulate estimate a dynamic model using project-level data dredging industry. Model estimates indicate substantial savings due to but also that presence in market yields reduction. A counterfactual policy featuring direct competition sector finds total expenditure reduction 15.7 percent. (JEL D44, H41, H57, L84)