Choosing Whether to Buy or Make: The Contracting Out of Employment Reintegration Services by Dutch Municipalities

Abstract

The Western welfare states are under reform. An important part of these reforms is the introduction of market type mechanisms for the deliverance of public services. Over the years, many countries have chosen to contract out employment reintegration services. The underlying notion of contracting out is the belief that the introduction of market elements in the production of public services increases effectiveness and efficiency. In addition to the cost benefit argument for contracting out public services, ideology is often brought forward as an important factor explaining why public services are provided in-house. In this article, we analyze to what extent cost benefit arguments and ideology affect the make or buy decision of Dutch municipalities. The Dutch employment reintegration market poses an interesting case in point since Dutch municipalities have the option to either provide employment reintegration services themselves or to buy services on the market. Our analysis shows that cost benefit arguments do not play a role in the make or buy decision of Dutch municipalities. Ideology, however, does. Municipalities that adhere to the principles of New Public Management more often opt to buy employment reintegration services on the market. Also the outcomes of municipal elections have been found to be of importance - left-wing municipalities more often choose in-house service provision. © 2011 Blackwell Publishing Ltd.