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Yardstick Competition and Political Agency Problems

Author

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  • Paul Belleflamme

    (Queen Mary, University of London)

  • Jean Hendriks

    (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.

Suggested Citation

  • Paul Belleflamme & Jean Hendriks, 2001. "Yardstick Competition and Political Agency Problems," Working Papers 441, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:441
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    References listed on IDEAS

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    More about this item

    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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