Summary:

The purpose of this master thesis is to examine the economic effects of outsourcing administrative services in Norwegian ministries and directorates. Generally, the private delivery of government-funded services by means of contracting out constitutes an increasingly utilized alternative to public service provision. While popular political dogmas frequently press the advantages of private sector delivery, and economic effects are often assumed or promised, the empirical literature is divided. Consequently, through the application of transaction cost theory, this master thesis attempts to gain greater insight into the cost-saving potential of outsourcing administrative services in Norwegian central administrative agencies. In order to conduct the research, national accounting data from all central administrative agencies (i.e., 69 directorates and 16 ministries) in the time-period 2014-2020 has been gathered. The results from various specifications of fixed effects and dynamic panel models, suggest there is not found any support for the assumption that outsourcing of administrative services generate cost savings. More research is needed, however, before a definite conclusion about the cost-saving effect of outsourcing administrative services can be drawn.