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Competition in the political arena and local government performance

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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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Keywords: D72; D78; H11; H72; competition; government performance; productive efficiency; rent extraction

Document Type: Research Article

Affiliations: 1: Department of Economics and Finance, University of Durham, Durham, DH1 3HY, England 2: Department of Economics, Norwegian Business School BI, N-0442, Oslo, Norway 3: Department of Applied Economics, Vrije Universiteit Brussel, B-1050, Brussel, Belgium

Publication date: 03 July 2014

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