Make or Buy: Political hazards and the choice of governance of municipal services

Abstract

We study the link between the choice of governance and political hazards using municipal school canteens. We provide evidence that in politically contested cities, mayors are more likely to choose to "make" rather than "buy" to avoid challenge of the contract with a private partner. A higher probability of losing office – proxied by close victory margins and political concentration – increases the probability to "make". We also provide evidence that in cities where the potential challenge on sustainable supply is high, mayors tend to "make" also to signal trustworthiness to the voter. A higher presence of ecologist's citizens and alternative supply organizations – proxied by the presence of Agenda 21 and the presence of alternative and organic food shops – increases the probability to "make".