Market-based Governance and the Challenge for Rural Governments: US Trends

Privatization and decentralization represent market‐based approaches to government. Designed to increase efficiency and responsiveness of government, these approaches also limit the potential for redistribution. A key question is: how will rural governments compete in such a market‐based system? Will they be favoured, as their reliance on market provision for public goods is higher due to the smaller number of services provided by government? Or will they be less able to compete due to the costs of sparsity, which may make them less attractive to market suppliers? Data from the United States covering the period 1992–2002, show that rural areas are not favoured by either of these trends – privatization or decentralization. Managerial weakness does not explain the shortfall. Rural areas are not as attractive to market suppliers and thus are disadvantaged under market‐based service delivery approaches. Although national policy continues to advance a privatization agenda, policy‐makers should be concerned about the uneven impacts of such market‐based approaches.