Public Choice 66: 189-194, 1990. © 1990 Kluwer Academic Publishers. Printed in the Netherlands. More on the choice between public and private production of a publicly funded service ROBERT A. McGUIRE Department of Economics, University of California, Davis, CA 95616 ROBERT L. OHSFELDT School of Public Health, University of Alabama at Birmingham, Birmingham, AL 35294 T. NORMAN VAN COTT Department of Economics, Ball State University, Muncie, IN47306 1. Introduction In our recent paper in this journal (McGuire et al., 1987), we noted that the literature contained little systematic analysis of the choice of production mode (public or private firms) for a publicly funded service, despite the considerable attention given to the relative cost performance of public and private produc- tion and the coexistence of production modes. As a remedy for this gap in the literature, we developed a theoretical model of the choice of production mode which incorporated the potential for public-sector decision makers to pursue their self interests as less than perfectly faithful agents of the taxpayers demanding the service. The paper also provided an indirect empirical test of the implications of the model which, as we readily admitted, was far from ideal (1987: 219-221). On the basis of this empirical analysis, we concluded that nonmonetary factors were relatively more important than monetary factors in the production mode choice. It was our hope that the paper would provide a catalyst for further theoretical developments and more definitive empirical tests. Professor Pack's (1990) comment on our 1987 paper centers around the robustness of the empirical findings for our measure of monetary factors (rela- tive wages, RELWAGE) with respect to changes in model specification. She correctly notes that our empirical results imply that relative wages exercise more influence on public decision makers' choice of production mode when the model specification includes a panoply of demographic variables (Pack labels this specification the "full" model). The importance of relative wages is diminished considerably when only those variables explicitly justified by our theoretical model are included in the empirical specification (she labels this the "abbreviated" model). Pack's case for the importance of relative wages in the