A simple estimation method for aggregate government outsourcing

The scholarly and popular debate on the delegation to the private sector of governmental tasks rests on an inadequate empirical foundation, as no systematic data are collected on direct versus indirect service delivery. We offer a simple method for approximating levels of service outsourcing, based on relatively straightforward combinations of and adjustments to standard statistical series, primarily the National Income and Product Account and the Government Finances series produced by the Department of Commerce. The method permits us to separately estimate state and local from federal service outsourcing and (within the federal government) to distinguish between defense and non-defense services. Alternative estimates, both including and excluding Medicare and Medicaid, are included, as are estimates of outsourcing from 1959 through 2000. The method confirms the general view that the privately provided share of public services has increased particularly in the last two decades of the past century. But this increase has been shallower than many observers suggest, and as of 2000 more than two-thirds of the governments service budget was still devoted to employee compensation. (C) 2004 by the Association for Public Policy Analysis and Management.