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

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  • Lockwood, Ben

    (University of Warwick)

  • Porcelli, Francesco

    (University of Warwick)

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 e¤ect on the e¢ ciency 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 e¢ ciency, 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 signifcant effect on our efficiency indices. There is evidence of heterogenous 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. Key words: local government ; incentives ; efficiency ; difference in difference ; DEA JEL classification: H10 ; H70 ; H77 ; C21

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  • Lockwood, Ben & Porcelli, Francesco, 2011. "Incentive Schemes for Local Government : Theory and Evidence from Comprehensive Performance Assessment in England," The Warwick Economics Research Paper Series (TWERPS) 960, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:960
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    1. Guglielmo Barone & Guido de Blasio & Alessio D'Ignazio & Andrea Salvati, 2017. "Incentives to local public service provision: an evaluation of Italy�s Obiettivi di Servizio," Questioni di Economia e Finanza (Occasional Papers) 388, Bank of Italy, Economic Research and International Relations Area.
    2. repec:ces:ifodic:v:11:y:2013:i:1:p:19078519 is not listed on IDEAS
    3. Alessandro Gavazza & Mattia Nardotto & Tommaso Valletti, 2019. "Internet and Politics: Evidence from U.K. Local Elections and Local Government Policies," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(5), pages 2092-2135.
    4. Asatryan, Zareh & Heinemann, Friedrich & Yeter, Mustafa & Rubio, Eulalia & Rinaldi, David & Zuleeg, Fabian, 2016. "Public sector reform: How the EU budget is used to encourage it. Study," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 147039.
    5. Lockwood, Ben & Porcelli, Francesco & Redoano, Michela & Schiavone, Antonio, 2022. "Does Data Disclosure Improve Local Government Performance? Evidence from Italian Municipalities," QAPEC Discussion Papers 17, Quantitative and Analytical Political Economy Research Centre.
    6. Wahid Abdallah, 2017. "Electronic filing System, Bureaucratic Efficiency and Public Service Delivery: Evidence from Bangladesh," Working Papers id:12223, eSocialSciences.
    7. Chen, Yvonne Jie & Li, Pei & Lu, Yi, 2018. "Career concerns and multitasking local bureaucrats: Evidence of a target-based performance evaluation system in China," Journal of Development Economics, Elsevier, vol. 133(C), pages 84-101.
    8. Ivo Bischoff & Frédéric Blaeschke, 2013. "Incentives and Influence Activities in the Public Sector: the Trade-off in Performance Budgeting and Conditional Grants," MAGKS Papers on Economics 201320, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Ivo Bischoff & Frédéric Blaeschke, 2012. "Window-Dressing and Lobbying in Performance-Budgeting: a Model for the Public Sector," MAGKS Papers on Economics 201212, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    10. Ben Lockwood & Francesco Porcelli, 2013. "Incentive Schemes for Local Government," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(01), pages 55-63, April.
    11. Gersbach Hans, 2012. "Contractual Democracy," Review of Law & Economics, De Gruyter, vol. 8(3), pages 823-851, December.
    12. Gerdes, Christer, 2015. "Does Performance Information Affect Job Seekers in Selecting Private Providers in Voucher-Based ALMP Programs?," IZA Discussion Papers 8992, Institute of Labor Economics (IZA).
    13. Maria Alessandra Antonelli & Veronica Grembi, 2014. "Central Targets and local Agendas: Missing Lisbon 2010," Public Finance Research Papers 6, Istituto di Economia e Finanza, DSGE, Sapienza University of Rome.
    14. Madhusudhan B. V. Rao & Sridhar R. Prasad & Sowmya J. & Abida U. C., 2024. "Does Child-friendly Gram Panchayats Mean Good Governance? An Analysis of 10 Gram Panchayats in Karnataka," Journal of Development Policy and Practice, , vol. 9(1), pages 107-132, January.
    15. Ben Lockwood & Francesco Porcelli, 2013. "Incentive Schemes for Local Government," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(1), pages 55-63, 04.

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    More about this item

    Keywords

    local government ; incentives ; efficiency ; difference in difference ; dea jel classification: h10 ; h70 ; h77 ; c21;
    All these keywords.

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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