Abstract

http://ssrn.com/abstract=1860048
 
 

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Incentive Schemes for Local Government: Theory and Evidence from Comprehensive Performance Assessment in England


Ben Lockwood


University of Warwick - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Francesco Porcelli


University of Warwick

May 31, 2011

CESifo Working Paper Series No. 3483

Abstract:     
This paper studies Comprehensive Performance Assessment, an explicit incentive scheme for local government in England. Motivated by a simple theoretical political agency model, we predict that CPA should increase service quality and local taxation, but have an ambiguous effect on the efficiency of service provision. We test these predictions using a difference in difference approach, using Welsh local authorities as a control group, exploiting the fact that local authorities in Wales were not subject to the same CPA regime. To do this, we construct original indices of service quality and efficiency, using Best Value Performance Indicators. We estimate that CPA increased the effective band D council tax rate in England relative to Wales by 4%, and increased our index of service quality output also by about 4%, but had no significant effect on our efficiency indices. There is evidence of heterogeneous effects of CPA on efficiency, with some evidence that CPA impacted more on less efficient councils, and the ‘harder test’ from 2005-8 having a much bigger effect.

Number of Pages in PDF File: 46

Keywords: local government, incentives, efficiency, difference in difference, DEA

JEL Classification: H100, H700, H770, C210

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Date posted: June 8, 2011  

Suggested Citation

Lockwood, Ben and Porcelli, Francesco, Incentive Schemes for Local Government: Theory and Evidence from Comprehensive Performance Assessment in England (May 31, 2011). CESifo Working Paper Series No. 3483. Available at SSRN: http://ssrn.com/abstract=1860048

Contact Information

Ben Lockwood (Contact Author)
University of Warwick - Department of Economics ( email )
Coventry CV4 7AL
United Kingdom
+44 24 7652 8906 (Phone)
+44 24 7657 2548 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Francesco Porcelli
University of Warwick ( email )
Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom
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