Why do local governments privatize? Political representation and contagion in the privatization of welfare services in Sweden

Abstract

AbstractPrevious research has highlighted that decentralization is key to understanding the marketization of the Swedish welfare state, while local political factors are important to explaining the subnational differences in actual degrees of welfare service privatization. Other research has highlighted the impact of pragmatism rather than ideology in local government's decisions to outsource welfare services, including policy diffusion through geographical proximity to highly privatized municipalities. However, little research has been done on the role or type of political representation and whether this matters to the diffusion of welfare service privatization. Thus, there is little knowledge about whether local governments are primarily responsive to public preferences, the ideological position of the local government, or influences from neighboring municipalities. Drawing on the literature on political representation and policy diffusion, I test three hypotheses: that the local governments are primarily responsive to public preferences (sanction representation), that local governments are primarily responsive to their own ideological position (gyroscopic representation), or that local governments are primarily influenced by outsourcing in neighboring municipalities (contagion). Using a time‐lagged correlational design with survey data covering both local politicians and ordinary municipal residents, as well as public accounts of municipal outsourcing, I find that public preferences play a negligible role to the privatization process. A minor part of the between‐municipal variation in welfare service privatization can be attributed to the preferences of local politicians (gyroscopic representation), while a more substantial part is due to pressures from outsourcing among municipal neighbors (contagion).