Biased Competition, Popularity Shocks, and Government Inefficiency
17 Pages Posted: 9 Jun 2011
Date Written: June 9, 2011
Abstract
We present an electoral agency model that, in a stylized way, captures the public finance structure of Norwegian municipal governments. It drives the following main implication: increasing partisan bias in favor of the incumbent reduces efficiency in public production, and more so the higher the variation of random popularity shocks in voting. This implication is tested on panel-data regressions for the period 2001-2009, including more than 400 Norwegian local governments per year. Local governments are insitutionally similar, and produce welfare services subject to a fixed amount of revenue. Utilizing exogenous sources of variation to construct our measures of random shocks and partisan bias, we find strong statistical support for the model implication. Furthermore the effects of electoral agency on efficiency are both plausible and sizable in economic terms.
Keywords: Electoral agency, local government
JEL Classification: D72, H72
Suggested Citation: Suggested Citation
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