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Yardstick Competition and Political Agency Problems

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  • Paul Belleflamme

    (Queen Mary, University of London)

  • Jean Hindriks

    (Queen Mary, University of London)

Abstract

This paper analyzes the role of yardstick competition for improving political decisions. We examine how performance comparisons across jurisdictions affect the agency problem resulting from uncertainty about politicians (adverse selection) and their policies (moral hazard). We study two forms of inefficiency: the provision of non-valuable programmes (over-provision) and the failure to provide valuable programmes (under-provision). We find a general neutrality result: yardstick competition does not affect the chance that at least one type of politician in one jurisdiction will take inefficient decision, nor does it affect the risk of underproviding good programmes. However, performance comparisons reduce the risk of providing bad programmes in both jurisdictions.

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Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 441.

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Date of creation: Oct 2001
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Handle: RePEc:qmw:qmwecw:wp441

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Keywords: Electoral competition; Yardstick competition;

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  1. Brennan,Geoffrey & Buchanan,James M., 1980. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521233293.
  2. Easterly, William & Baqir, Reza & Alesina, Alberto, 2000. "Redistributive Public Employment," Scholarly Articles 4553013, Harvard University Department of Economics.
  3. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
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