Contracting dynamics and unionisation: managing labour, contracts and markets

What is the impact of unionisation on contracting dynamics? Using a panel of 523 US local governments from 2007 to 2012, we find the level of new contracting out is equal to contract reversals (re-municipalisation) among sampled municipalities. Interestingly, new contracts are higher among unionised municipalities, while reversals are higher among non-unionised municipalities. While public administration theory would expect the opposite results, we draw from industrial relations and pragmatic municipalism theory to explain these differences. Our regression models find unionised municipalities are better able to balance political and labour interests with contract and market management. Labour opposition has no effect on contracting dynamics, but unionised localities give more attention to contract monitoring and service characteristics. Unionised municipalities ensure the core features for successful contracting (monitoring, balancing interests, managing markets), but reverse contracts when those standards are not met. Thus, unionised localities represent better the institutional arrangements necessary for effective contracting.