Incumbents and Innovations under Decentralization: An Empirical Exploration of Selected Local Governments in the Philippines

Abstract

Like in other developing countries, many local governments in the Philippines have become innovative under decentralization. We investigate here the drivers of local innovations, with focus on quality of incumbent leaders, their political incentives and fiscal resources. We applied Poisson regressions on a survey data comprising 209 innovations introduced in 48 cities and municipalities during the period June 2004–June 2008. The statistically significant factors are the mayor's competence (age, educational attainment), re-election status and term in office. Innovations appear to increase with local fiscal resources but at decreasing rate. Access to information appears not to matter much. However, these factors, including poverty rates, vary in relative importance in explaining innovations in expenditure services, and in revenue and public administration services. Some policy inputs are suggested.     

Dealing with Austerity: a case of local resilience in Southern Europe

Southern countries are undergoing a severe economic crisis that has renewed debates about the available strategies to economise their public resources. Political leaders have launched a wide range of different strategies aimed at reducing spending. According to generally accepted political discourse, drastic actions should be taken to guarantee economic and financial sustainability in times of austerity. We explore the main measures adopted by Spanish municipalities in order to examine their impact in budgetary terms. First of all, we identify the most frequently implemented mechanisms including organisational structure, public services and operational economic restructuration. After their quantification, we monitor the presence and impact of each set of policies to analyse the relationship between concrete measures and effective economic impact. The effective reduction of budgets is being implemented but data show that local governments are resilient to non-compulsory changes. The ‘government at a distance’ policy pursued by the central state administration has effectively reduced budgets but has not affected the institutional core of Spanish local governments.     

Do the illegal and legal rents of politicians affect municipal election outcomes? Empirical evidence

This paper aims to analyse whether illegal (corruption) and legal rent extraction (high politicians’ wages) affect electoral outcomes at municipal level. We use an initial sample of 145 Spanish municipalities over 50,000 for two electoral periods: 2004–2007 (before the crisis) and 2008–2011 (during the crisis). Our findings show that neither illegal nor legal rent extraction impact on re-election in non-crisis times. However, we observe that citizens penalize legal rent extraction in the ballots during the crisis. Regarding the economic performance of the local governments, we find that its effect on re-election is important in non-crisis period. Nevertheless, in time of crisis, given that the economic situation is bad in general in the country, voters pay less attention to economic factors and focus on politicians’ behaviour.     

COMPETITION OR MONOPOLY? COMPARING PRIVATIZATION OF LOCAL PUBLIC SERVICES IN THE US AND SPAIN

Differences in national traditions of public intervention, institutional arrangements and public service markets make local public services an area of great diversity. In this paper we undertake a comparative study of how local governments arrange for delivery of water and waste services in the US and Spain. We find levels of privatization are higher in Spain than in the US. We review organizational reform in the two contexts and compare service delivery data using national surveys from each country. We find lower and less stable privatization in the US stems in part from adherence to public choice emphasis on the benefits of market competition over public monopoly. By contrast, Spanish municipalities reflect an industrial organization approach, and create hybrid public/private firms which benefit from both market engagement and economies of scale available under monopoly production. We conclude that managing monopoly may be more important than competition in local service delivery.     

The use of intergovernmental grants to municipalities for electoral purposes by subnational governments

Subnational governments devote a significant share of their financial resources to help municipalities provide local public services to their citizens. Compared to the large number of studies on national governments, little effort has been devoted to the influence of distributive politics on the use of intergovernmental grants by subnational governments. To fill this gap, this study uses a data set covering the period 2001–2011 to verify to what extent the Québec government used conditional grants to municipalities for electoral purposes. The results of this study show that the allocation of grants to municipalities is not exempt from electoral politics as municipalities located in districts held by governing parties or in high electoral competition districts receive more grants than other municipalities. However, the influence of electoral politics decreases substantially when the management of intergovernmental grants is under tight scrutiny by the opposition parties, mass media and the population. These findings suggest that distributive politics can be conceptualised as a political agency problem whose prevalence is seriously constrained by the improvement of the transparency of public policies management.     

Partial Privatisation in Local Services Delivery: An Empirical Analysis of the Choice of Mixed Firms

Mixed public–private firms are increasingly used in several European countries. This paper makes use of survey data from Spanish municipalities to examine the motivations of local governments for engaging in partial privatisation of local service delivery of water distribution and solid waste collection. The empirical analysis indicates that mixed firms emerge as a pragmatic middle way between purely public and purely private production. Indeed, local governments make use of mixed firms when cost considerations, financial constraints and private interests exert contradictory pressures. Political and ideological factors play no significant role in that decision.     

Contracting Out: Dutch Municipalities Reject the Solution for the VAT Distortion

In 2003, the Dutch government introduced a VAT-compensation fund in order to create a level playing field for local governments with respect to Value Added Tax (VAT). This fund eliminates the effect of the tax difference between local governments that supply services themselves and local governments that contract out services to the private sector. However, as this article shows, according to most municipalities, differences in their treatment in terms of VAT did not hinder the contracting out of public services. Therefore, the VAT compensation fund lacks legitimacy. It appears to have had little effect so far, as the number of contracted-out public services has hardly increased since its introduction. In general, municipalities have a negative opinion of the fund. They state that non-budgetary effects and institutional considerations, such as the quality of services, the vulnerability of municipal activities and concern for employment in the municipality itself, are more relevant to decision making on outsourcing.     

Dynamic-opportunistic behaviour in local government contracting-out decisions during the electoral cycle

A major question for public managers is whether municipal services should be rendered in-house or contracted out. In view of the negative perceptions often aroused by contracting out, this political decision might be framed within a theoretical model that we term ‘dynamic-opportunistic behaviour’. According to this model, the probability of municipal services being contracted out is greater in the years immediately following elections; moreover, during this period the decision is taken more quickly. In this theoretical model, not all factors (budgetary, economic, political, service characteristics and socio-economic) have an equal impact on the contracting-out decision during each year of the electoral cycle. The model was applied to a sample of 2,274 Spanish municipalities, with respect to a broad time horizon (2002–2014), and the results obtained confirm our hypotheses regarding dynamic-opportunistic behaviour in the contracting out of local public services.     

WHY DO LOCAL GOVERNMENTS PRIVATIZE THE PROVISION OF WATER SERVICES? EMPIRICAL EVIDENCE FROM SPAIN

Why do some local governments privatize water services, while others opt for public management? Economic literature has been unable to demonstrate that private management is more efficient than public management, so there must be other reasons that lead governments to privatize the service. But what are they? This paper presents the results of a study that analyses the factors behind the privatization of water services with data from 741 municipalities located in the South of Spain over a period dating from 1985 to 2006. A discrete choice model analyses the influence of each factor on the likelihood of privatization. One of the novelties of this paper is that we take the value of the explanatory variables at the time when water services are privatized. Among our findings, it is worth highlighting the importance of the size of municipalities, their financial burden and the neighbouring effect.     

Intermunicipal cooperation,public spending and service levels

ABSTRACT

Local governments can increase size in particular policy fields through cooperation with other local governments. This is often thought to improve efficiency, but there is little empirical evidence supporting this hypothesis. We study the case of the Netherlands, which has been a veritable laboratory of intermunicipal cooperation (IMC), using panel data for 2005–2013. We find no evidence that IMC reduces total spending of the average municipality. Indeed, IMC seems to increase spending in small and large municipalities, leaving spending in mid-sized municipalities unaffected. In one specific field, tax collection, spending may be reduced through IMC. Spending in this field is low, which may explain why total spending is unaffected. Instead of lowering spending, municipalities may have used possible cost savings as a result of IMC to improve public service levels. We do not find evidence substantiating this hypothesis, however.     

LEARNING FROM SUCCESS: ARE SUCCESSFUL GOVERNMENTS ROLE MODELS?

Do local governments learn from their successful peers when designing public policies? In spite of extensive research on policy diffusion and learning, there is still a lack of studies on how success relates to learning patterns. We address this deficiency by examining which other governments local administrative units draw lessons from. More precisely, we investigate whether public managers learn from the experiences of local governments whose citizens are satisfied with government services. Using a large dyadic dataset on all Swedish municipalities from 2010, we find that senior public managers in local administrations learn from similar local governments and from neighbours. But we also find clear evidence that they learn from local governments whose citizens are pleased with local public services. This indicates that best practices are spread among local governments.     

Towards Performance,Quality and Environmental Management in Local Government: the Case of Spain

The search for improvements in the management and quality of public services seems to be a constant in all public administrations, and there is an ever-increasing use of management techniques and models from the business sector. The aim of this paper is to show which management systems are being used by Spanish local governments to improve their management in terms of economy, quality and the environment. Our analysis is based on a questionnaire sent to Spanish local governments about the tools they use and the factors that influence their implementation. The results show that more efforts are necessary to implement performance measurement and total quality management, but they also show some positive aspects, such as the usefulness of performance measurement and its application to decisions in those local governments that have implemented it.     

Shared services in Brazilian local government: Urban development in small counties

In this article we break new ground by investigating cooperative agreements in urban development services, which include urban development, housing and sanitation for small local governments in Brazil (i.e., those with fewer than 20,000 residents in 2013–15). We find that public expenditure on urban development can be explained by both horizontal (intermunicipal cooperation) and vertical (public–public partnerships) cooperation. Regarding the impact of public sector cooperation on public expenditure, our results show that housing and sanitation services are less costly under intermunicipal cooperation. By contrast, urban development services are less costly when local authorities do not cooperate with other public entities. For public–public partnerships (with the state or federal government) cooperation leads to an increase in public funding, which implies that cooperative agreements might not lead to lower public expenditure. The findings in this article provide useful empirical insights into the administrative reorganization of Brazilian local government.     

PRAGMATIC MUNICIPALISM: LOCAL GOVERNMENT SERVICE DELIVERY AFTER THE GREAT RECESSION

Since the Great Recession, some have argued that local governments have become ‘austerity machines’ that cut and privatize services and undermine unions. We conducted a national survey of US municipalities in 2012 to examine how service provision level and delivery methods are related to local stress and capacity, controlling for community need and place characteristics. We find that local governments are balancing the pressures of stress with community needs. They use alternative revenue sources and service delivery methods (privatization and cooperation) to maintain services. Unionization is not a barrier to innovation. Further, we find that ethnically diverse suburbs are providing more services than other suburbs, thus acting more like metro core cities. We find that the Great Recession has not dramatically shifted local government behaviour to a ‘new normal’ of fiscal austerity. Instead, we find municipalities practising ‘pragmatic municipalism’ to maintain their public role.     

The Performance of Nursery Schools in Italian Municipalities

In a neo-liberal approach, the need to increase levels of cost saving, effectiveness, and quality in producing local public services is correlated to awareness of the limited resources available and is an economic issue that has been much debated in recent decades. Ways of measuring and evaluating public services have stimulated academic interest for several years now. In this context, evaluating the levels of performance of public services provided by non-profit organizations (NPOs) as a consequence of contracting-out by public administration is an essential variable in rationalizing—both in terms of quantity and quality—public expenditure.

The aim of this article is to measure multi-dimensional aspects of nursery school services offered by Italian municipalities and to verify whether using different management models makes a difference in the results obtained. We examine data contained in final accounts of main Italian municipalities in order to evaluate effectiveness, cost saving, and quality aspects of the nursery school service supplied.

Regarding overall performance, the distinction between direct management and contracting-out has not brought out significant differences in terms of effectiveness and cost saving, even if the direct management solution is better than the externalized one. By contrast, as previous research showed, quality levels for externalized services are on average lower than for directly managed services.     

Analysing credit risk in large local governments: an empirical study in Spain

In governments throughout the world, bank lending excesses, solvency issues and worsening credit ratings have all contributed to raising risk premiums and impeding access to credit, thus provoking a major financial problem in the public sector. Accordingly, tax authorities and regulators need to analyse the causes of public sector bank debt, doing so through the joint study of idiosyncratic and systematic variables, an area that has been neglected in previous research. This paper examines idiosyncratic and systematic factors that may influence local government credit risk through an empirical study of the performance of 148 large Spanish municipalities during 2006–2011. We identify individual factors relevant to the probability of local government default (such as dependent population, per capita income and debt composition) and also determinants associated with macroeconomic developments, such as gross domestic product and the risk premium.     

Cooperation,not cost savings: explaining duration of shared service agreements

Among local governments, inter-municipal cooperation is the growing reform; but the literature is silent regarding the determinants of longer-term shared service agreements. We conducted a survey of all local governments in New York State in 2013 to assess the level of sharing across 29 public services. The duration of shared service agreements varies from 1 to 80 years. What explains this difference? Our hierarchical linear model shows that service sharing agreements fall along a cooperation continuum, where cost savings are a determinant of shorter agreements, while the public values of service quality and cross-jurisdictional coordination explain longer-term agreements. We also find that positive past experience with sharing partners increases the duration of sharing agreements. Our analysis lays the foundation for new theories of shared services that build directly from the benefits of improved regional coordination, inter-municipal reciprocity and service quality, not from theories based solely on competition and costs.     

Amalgamation Impacts on Local Public Expenditures in Sweden

This paper concerns amalgamation impacts on local public expenditures. The empirical analysis is based on the extensive 1952 municipal reform in Sweden. The 1952 reform amalgamated municipalities in a way that they had at least 2,000–3,500 inhabitants. This was done in the belief that larger municipalities would improve administration efficiency and public services by exploiting economies of scale. The results show that the reform had a negative impact on expenditures as long as the municipalities did not exceed a critical size.     

The Impact of the Housing Bubble on the Growth of Municipal Debt: Evidence from Spain

The aim of this paper is to analyse the impact of the recent Spanish housing boom and the subsequent burst on local public finances. Particularly, we investigate the effect of the rise and later fall in revenue from urban development on local government debt. Using a sample of the Spanish largest municipalities in the period 2003–2011, we find that debt was substituted by revenue from urban development during boom years and this substitution effect vanished after the burst of the boom. Our results also reveal that local public finances have worsened after the burst of the housing bubble since now they have larger current spending and smaller savings.     

Urban Regeneration Policy from the Integrated Urban Development Model in the European Union: an Analytical Approach Based on the Study of Spanish Cities

For several years, local governments have been tackling new challenges related to the regeneration of their cities within the physical sphere, as well as in their economic and social aspects. This task is developed in accordance with what has been called the Integrated Urban Development Model, understanding the integrated nature of this approach not only in terms of the spheres of public policy involved, but also in relation to their management. In this paper, this management is analysed in terms of the development of mechanisms for New Local Governance and New Public Management (NPM). Using Spanish municipalities as a case study, this paper develops an analytical tool for the analysis of this model of urban intervention within the European context, paying close attention to the development of mechanisms for New Local Governance from a multilevel perspective, as well as the development of mechanisms for NPM.