The Efficiency of Local Public-Service Production: The Effect of Political Institutions

Peter Bönisch and Peter Haug

FinanzArchiv: Public Finance Analysis, 2018, vol. 74, issue 2, 260-291

Abstract: Reforms replacing municipal cooperations by centralized municipalities often aim at increasing municipal efficiency. Empirical evidence supporting this aim, however, is ambiguous. Our paper analyzes the effect of institutions on municipal efficiency. In particular, we distinguish two archetypal institutional settings, a centralized and a confederal one, and argue that bureaucrats in a centralized setting are able to increase the fiscal residual. Our empirical test case is the German federal state of Saxony-Anhalt. We test the effect of the institutional setup using the bootstrap approach suggested by Simar and Wilson (2007), concluding that a decentralized institutional setting improves the efficiency of municipal production.

Keywords: local institutions; efficiency; DEA; second-stage bootstrap (search for similar items in EconPapers)
JEL-codes: H11 H72 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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DOI: 10.1628/fa-2018-0008

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