Can Good Politicians Compensate for Bad Institutions? Evidence from an Original Survey of Italian Mayors

Abstract

Can competent political leaders bring significant policy changes to communities otherwise doomed by “bad” informal institutions? This question has remained unanswered due to the lack of a convincing measure of politicians’ competence. I develop a novel survey technique to measure the administrative competence of executive politicians and apply it in interviews to 306 Italian mayors. I study the impact of mayors’ administrative competence on the policies they enact using a difference-in-differences approach. Results show that more competent mayors are associated with better policies but the association is only present in cases where the quality of informal institutions is low. In these municipalities, the election of more competent mayors translates into a more effective use of funds, an increase in long-term investments, and better service provision without an increase in taxes. Results hold across different measures of institutional quality.

Keywords: Administrative Competence, Mayors, Informal Institutions

JEL Classification: D72, D73, L38