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

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  • Peter Bönisch
  • Peter Haug

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.

Suggested Citation

  • Peter Bönisch & Peter Haug, 2018. "The Efficiency of Local Public-Service Production: The Effect of Political Institutions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 74(2), pages 260-291, June.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201806)72:2_260:teolpp_2.0.tx_2-u
    DOI: 10.1628/fa-2018-0008
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    More about this item

    Keywords

    local institutions; efficiency; DEA; second-stage bootstrap;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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