Competition reduces rent extraction in private-sector firms. In this article, we empirically assess whether it similarly disciplines politicians by evaluating local-level governments’ performance in Flanders. The results indicate that electoral competition – measured
via the number of parties competing in elections – significantly positively affects the productive efficiency of municipal policy. Intertemporal competition – measured as the volatility of election outcomes over time – has a similar, but weaker, positive effect. These
beneficial effects are mitigated by the fact that competition may lead to more fragmented governments, which is shown to work against their productive efficiency. Overall, though, the beneficial effects outweigh the unfavourable ones in our sample.
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Document Type: Research Article
Department of Economics and Finance, University of Durham, Durham, DH1 3HY, England
Department of Economics, Norwegian Business School BI, N-0442, Oslo, Norway
Department of Applied Economics, Vrije Universiteit Brussel, B-1050, Brussel, Belgium
Publication date: 03 July 2014
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