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

Ben Lockwood and Francesco Porcelli

No 270764, Economic Research Papers from University of Warwick - Department of Economics

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 di§erence in di§erence 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 e§ective 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 signiÖcant e§ect on our e¢ ciency indices. There is evidence of heterogenous e§ects of CPA on e¢ ciency, with some evidence that CPA impacted more on less e¢ cient councils, and the "harder test" from 2005-8 having a much bigger effect.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 46
Date: 2011-04-26
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Incentive Schemes for Local Government: Theory and Evidence from Comprehensive Performance Assessment in England (2013)
Working Paper: Incentive Schemes for Local Government: Theory and Evidence from Comprehensive Performance Assessment in England (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:270764

DOI: 10.22004/ag.econ.270764

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