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American Economic Journal: Economic Policy: Vol. 5 No. 3 (August 2013)

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

Article Citation

Lockwood, Ben, and Francesco Porcelli. 2013. "Incentive Schemes for Local Government: Theory and Evidence from Comprehensive Performance Assessment in England." American Economic Journal: Economic Policy, 5(3): 254-86.

DOI: 10.1257/pol.5.3.254

Abstract

This paper studies Comprehensive Performance Assessment, an explicit incentive scheme for local government in England. Motivated by a theoretical political agency model, we predict that CPA should increase service quality and local taxation, but have an ambiguous effect on the efficiency of service provision. We test these predictions using Welsh local governments as a control group: CPA increased the property tax, and our index of service quality, but had no significant effect on efficiency overall. There is evidence of a heterogenous effect of CPA: it impacted more on councils where electoral competition was initially weak, in line with our theory.

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Authors

Lockwood, Ben (U Warwick)
Porcelli, Francesco (U Warwick)

JEL Classifications

H71: State and Local Taxation, Subsidies, and Revenue
H72: State and Local Budget and Expenditures
H75: State and Local Government: Health; Education; Welfare; Public Pensions
H76: State and Local Government: Other Expenditure Categories
R51: Finance in Urban and Rural Economies

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