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AbstractLocal governments in the USA are facing increased levels of fiscal stress after the Great Recession. We conducted a national survey in 2012 to assess differences in sources of stress and service delivery responses (privatization, inter‐municipal co‐operation, and public delivery) across places. Our discriminant analysis on 1,889 US cities and counties contributes to the literature on state rescaling. We differentiate three types of stress: fiscal, housing market decline and demographic. Fiscal stress and demographic stress are linked and highest in metro core and rural places, while housing market decline is associated with population density and revenue diversification. Diverse revenue sources can ameliorate some of the fiscal challenges brought on by housing market decline. Regarding service delivery, we find privatization and co‐operation are higher in suburbs. State aid dependence is highest in rural and metro core areas with greater need, but decrease in state aid is highest in the South and West, where fiscal stress is also highest. Decentralization has exacerbated spatial inequality in the wake of the Great Recession challenging the efficiency claims of fiscal federalism. More redistributive state policies are needed.

Since the Great Recession, some have argued that local governments have become 'austerity machines' that cut and privatize services and undermine unions. We conducted a national survey of US municipalities in 2012 to examine how service provision level and delivery methods are related to local stress and capacity, controlling for community need and place characteristics. We find that local governments are balancing the pressures of stress with community needs. They use alternative revenue sources and service delivery methods (privatization and cooperation) to maintain services. Unionization is not a barrier to innovation. Further, we find that ethnically diverse suburbs are providing more services than other suburbs, thus acting more like metro core cities. We find that the Great Recession has not dramatically shifted local government behaviour to a 'new normal' of fiscal austerity. Instead, we find municipalities practising 'pragmatic municipalism' to maintain their public role.

Austerity and fiscal crisis make the search for cost-saving reforms in local government more critical. While cost savings from privatization have frequently proven ephemeral, inter-municipal cooperation has been a relatively understudied reform. We analyse the literature on cost savings under cooperation and find that savings are dependent on (1) the cost structure of public services, particularly those related to scale and density economies and externalities, (2) the structure of local government (size, metropolitan location, powers granted by the nation or regional state), and (3) the governance framework at the local/regional level where cooperation varies from informal to formal. European studies give more emphasis to cost savings, while US studies focus on coordination concerns arising from the higher degree of devolution in the US local government system. Adapted from the source document.

Austerity and fiscal crisis make the search for cost‐saving reforms in local government more critical. While cost savings from privatization have frequently proven ephemeral, inter‐municipal cooperation has been a relatively understudied reform. We analyse the literature on cost savings under cooperation and find that savings are dependent on (1) the cost structure of public services, particularly those related to scale and density economies and externalities, (2) the structure of local government (size, metropolitan location, powers granted by the nation or regional state), and (3) the governance framework at the local/regional level where cooperation varies from informal to formal. European studies give more emphasis to cost savings, while US studies focus on coordination concerns arising from the higher degree of devolution in the US local government system.

ABSTRACTBerlin, Germany used a public sector restructuring and partial privatization scheme to reduce labour costs and promote process innovation in its transit system. Utilizing financial and operational data, we find the partial privatization reduced wages and benefits, but a subsequent unionization effort eroded many of the labour cost savings. We find restructuring of the public sector portions of the service was more effective than the privatization in promoting labour shedding and in designing route restructuring to reduce system costs while enhancing customer satisfaction with transit services. This case study suggests mixed public‐private firms may be less important as a means to harness the benefits of private sector management and more important as a means to challenge labour rights.