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Public Sector Efficiency: The Roles of Political and Budgetary Institutions, Fiscal Capacity and Democratic Participation

  • Lars-Erik Borge


    (Department of Economics, Norwegian University of Science and Technology)

  • Torberg Falch


    (Department of Economics, Norwegian University of Science and Technology)

  • Per Tovmo


    (Department of Economics, Norwegian University of Science and Technology)

The purpose of this paper is to investigate whether efficiency in public service provision is affected by political and budgetary institutions, fiscal capacity, and democratic participation. In order to address this issue we take advantage of a new global efficiency measure for Norwegian local governments. There is strong evidence that high fiscal capacity and a high degree of party fragmentation contributes to low efficiency. In addition we find that increased democratic participation tends to increase efficiency, while a centralized top down budgetary process is associated with low efficiency.

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Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 8407.

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Length: 32 pages
Date of creation: 01 May 2007
Date of revision:
Handle: RePEc:nst:samfok:8407
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  1. Per Tovmo, 2007. "Budgetary Procedures and Deficits in Norwegian Local Governments," Economics of Governance, Springer, vol. 8(1), pages 37-49, January.
  2. DE BORGER, Bruno & KERSTENS, K. & MOESEN, Wim & VANNESTE, Jacques, 1992. "Explaining differences in productive efficiency: An application to Belgian municipalities," SESO Working Papers 1992003, University of Antwerp, Faculty of Applied Economics.
  3. De Borger, Bruno & Kerstens, Kristiaan, 1996. "Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA, and econometric approaches," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 145-170, April.
  4. Geys, Benny, 2006. "Looking across borders: A test of spatial policy interdependence using local government efficiency ratings," Journal of Urban Economics, Elsevier, vol. 60(3), pages 443-462, November.
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  6. Hayes, Kathy J & Razzolini, Laura & Ross, Leola B, 1998. " Bureaucratic Choice and Nonoptimal Provision of Public Goods: Theory and Evidence," Public Choice, Springer, vol. 94(1-2), pages 1-20, January.
  7. Borge, Lars-Erik, 2000. "Charging for public services: the case of utilities in Norwegian local governments," Regional Science and Urban Economics, Elsevier, vol. 30(6), pages 703-718, December.
  8. Chan, Kenneth S. & Mestelman, Stuart, 1988. "Institutions, efficiency and the strategic behaviour of sponsors and bureaus," Journal of Public Economics, Elsevier, vol. 37(1), pages 91-102, October.
  9. Emili Tortosa Ausina & Diego Prior & María Teresa Balaguer-Coll, 2004. "On The Determinants Of Local Government Performance: A Two-Stage Nonparametric Approach," Working Papers. Serie EC 2004-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  10. Lars-Erik Borge & Linn Renée Naper, 2006. "Efficiency Potential and Efficiency Variation in Norwegian Lower Secondary Schools," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(2), pages 221-249, June.
  11. Lars-Erik Borge & Linn Renée Naper, 2005. "Efficiency Potential and Efficiency Variation in Norwegian Lower Secondary Schools," CESifo Working Paper Series 1624, CESifo Group Munich.
  12. Borge, Lars-Erik, 2005. "Strong politicians, small deficits: evidence from Norwegian local governments," European Journal of Political Economy, Elsevier, vol. 21(2), pages 325-344, June.
  13. Dennis C. Mueller & Thomas Stratmann, 2002. "The Economic Effects of Democratic Participation," CESifo Working Paper Series 656, CESifo Group Munich.
  14. António Afonso & Miguel St. Aubyn, 2004. "Non-parametric Approaches to Education and Health Expenditure Efficiency in OECD Countries," Working Papers Department of Economics 2004/01, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  15. Niskanen, William A, 1975. "Bureaucrats and Politicians," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 617-43, December.
  16. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, October.
  17. Yianos Kontopoulos & Roberto Perotti, 1999. "Government Fragmentation and Fiscal Policy Outcomes: Evidence from OECD Countries," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 81-102 National Bureau of Economic Research, Inc.
  18. Duncombe, William & Miner, Jerry & Ruggiero, John, 1997. " Empirical Evaluation of Bureaucratic Models of Inefficiency," Public Choice, Springer, vol. 93(1-2), pages 1-18, October.
  19. Moene, Karl O., 1986. "Types of bureaucratic interaction," Journal of Public Economics, Elsevier, vol. 29(3), pages 333-345, April.
  20. Strom, Bjarne, 1995. "Envy, Fairness and Political Influence in Local Government Wage Determination: Evidence from Norway," Economica, London School of Economics and Political Science, vol. 62(247), pages 389-409, August.
  21. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
  22. John Ashworth & Benny Geys & Bruno Heyndels, 2005. "Government Weakness and Local Public Debt Development in Flemish Municipalities," International Tax and Public Finance, Springer, vol. 12(4), pages 395-422, August.
  23. Stefania Fabrizio & Ashoka Mody, 2006. "Can budget institutions counteract political indiscipline?," Economic Policy, CEPR;CES;MSH, vol. 21(48), pages 689-739, October.
  24. Falch, Torberg & Rattso, Jorn, 1997. "Political economic determinants of school spending in federal states: Theory and time-series evidence," European Journal of Political Economy, Elsevier, vol. 13(2), pages 299-314, May.
  25. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc.
  26. Afonso, António & Schuknecht, Ludger & Tanzi, Vito, 2003. "Public sector efficiency: an international comparison," Working Paper Series 0242, European Central Bank.
  27. Jorid Kalseth & Jørn Rattsø, 1998. "Political Control of Administrative Spending: The Case of Local Governments in Norway," Economics and Politics, Wiley Blackwell, vol. 10(1), pages 63-83, 03.
  28. Grosskopf, Shawna & Hayes, Kathy J. & Taylor, Lori L. & Weber, William L., 2001. "On the Determinants of School District Efficiency: Competition and Monitoring," Journal of Urban Economics, Elsevier, vol. 49(3), pages 453-478, May.
  29. Nouriel Roubini & Jeffrey Sachs, 1989. "Government Spending and Budget Deficits in the Industrial Economies," NBER Working Papers 2919, National Bureau of Economic Research, Inc.
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  31. Falch, Torberg, 2001. "Collective bargaining in the public sector and the role of budget determination," European Journal of Political Economy, Elsevier, vol. 17(1), pages 75-99, March.
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