Management Discretion and Political Interference in Municipal Enterprises. Evidence from Italian Utilities

The attention of scholars and policy-makers is shifting from full privatisation to alternative measures as a means to improve the efficiency of public services. This article focuses on three restructuring measures adopted by local governments: partial privatisation (without transfer of control rights), inter-municipal joint ventures, and the presence of outside directors on the Board. Divergent hypotheses on these measures have emerged from two economic theories, namely public choice and the agency perspective. An empirical analysis investigates the effects of restructuring processes on a sample of Italian municipal utilities. Partial privatisation has been shown to play a significant and positive role, while Board independence from management has a less significant influence. Multi-government utilities have been found to suffer from severe coordination costs, which are not outweighed by scale benefits. Our findings reveal that management discretion is a significant source of inefficiency in municipal enterprises.     

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.     

Viability of Municipal Companies in the Provision of Urban Infrastructure Services

This article discusses the organisational and institutional model of municipal company in the provision of urban infrastructure services in Portugal. The law recently enacted which defined the legal regime for the local business sector, as well as the growing awareness that the new public management models represent great advantages in comparison with the bureaucratic ones that characterise the traditional public administration, make this a current and relevant issue. For the purpose of investigating the viability of this provision model, this research encompasses three complementary analyses. First, the results obtained from a nationwide questionnaire on the features of municipal companies are analysed. Second, a SWOT matrix is constructed to examine the model of municipal company and, third, the total factor productivity (TFP) of these organisations is determined using the index number theory, in order to evaluate their performance and compare it with that of the traditional bureaucratic models. Although the concept of municipal company is based on noble principles and, in theory, it shows advantages compared to other means of service provision, this research points to very negative results regarding the model and leads to the conclusion that the aimed benefits are not achieved in Portugal. There are many causes contributing to this effect, but the political patronage of these companies and the lack of technical competence are presumably two of the most significant ones.     

Welfare Loss with Municipal Amalgamations and the Willingness-to-Pay for the Municipality Name

Functional advantages and drawbacks are commonly mentioned to rationally justify or condemn municipality amalgamations. However, many consolidation projects are resisted by local governments or citizens on the grounds that amalgamation would dampen local identity. A municipality’s name change is probably the most visible sign of the loss of community bond experienced by citizens at amalgamation time. This article aims to put a value on this loss by measuring citizen willingness to pay for their city name. This methodological approach innovates upon the literature on municipal amalgamation and place branding by exploiting the versatility of the so-called contingent valuation method (CVM). CVM confronts respondents, in a survey setting, with a hypothetical market in which a characteristic of interest is exchanged. Here the characteristic is the possibility to retain one’s city name for an amalgamated jurisdiction. The article presents the estimates provided by a survey conducted in four Swiss cities.     

Ten years after: revisiting the determinants of the adoption of municipal corporations for local service delivery

Research on the use of municipal corporations to deliver local and regional public services has evolved significantly in the past decade. Most of this work addresses the performance of this service-delivery mode in relation to local bureaucracies. However, much less is known about the drivers for the adoption of municipal corporations in the first place. This article reviews the main determinants of adoption – service characteristics, institutional and regulatory settings, political constraints and financial conditions – and highlights the need for comparative research across countries.     

Municipal population size and the benefits of inter-municipal cooperation: panel data evidence from Japan

ABSTRACT

Intermunicipal cooperation (IMC) facilitates efficient public service delivery. This study measures how the benefits municipalities gain through IMC differ according to municipal population size and service provision type. Focusing on public health and fire protection services, this study employs panel data regression for 1,706 Japanese municipalities over a five-year period, 2012–2017. This study has several major findings. First, an increase in the IMC spending ratio reduces public spending in both the studied services. Second, the marginal effect of IMC varies depending on the size of the municipal population. More specifically, the marginal effect of IMC on public health has a narrow confidence interval with a wide ranging population scale, while the marginal effect of IMC on fire protection produces negative values for only 151 municipalities due to extensive standard error. These findings can help municipalities take advantage of IMC to improve public service delivery.     

Effect of Institutions: Analysis of Japanese Municipal Public Procurement

Using data from Japanese municipalities, this article analyzes the impact of institutional reform processes on the average winning bid for municipal public procurement. The results are (1) the general competitive bidding method led to a decrease in the average winning bid, and (2) bidding reform itself led to a decrease in the average winning bid. The former is a factor that results from the competition function, and the latter is an authority's commitment factor, which is rooted in an aggressive atmosphere for efficiency through the reformed bidding system; this factor is similar to the “Hawthorne Effect,” in which changes in businesses’ behavior during the course of a particular term may be related only to the special social situation, and social treatment that they encountered.     

Does intermunicipal cooperation increase efficiency? A conditional metafrontier approach for the Hessian wastewater sector

ABSTRACT

This paper analyses the relationship between intermunicipal cooperation and efficiency of public service provision. Organisational arrangements of public service production, including self-provision, joint provision or contracting, affect incentives and internal transaction costs. Hence, cooperation gains from scale effects need to be balanced against technical inefficiencies. We analyse relative efficiency of wastewater disposal for German municipalities. We employ a conditional analysis in conjunction with a metafrontier approach to calculate relative efficiency measures and technology gap ratios controlling for organisational arrangements and further environmental variables. Jointly providing municipalities and contractor municipalities exhibit lower technical efficiency than self-providing and contracting municipalities. As confirmed by previous research, scale effects from cooperation and contracting apply to small municipalities primarily.     

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.     

Citizen Participation and Neighbourhood Governance: Analysing Democratic Practice

From the late 1990s the New Labour government implemented changes to local government and, within the context of a discourse of ‘democratic renewal’, also introduced neighbourhood-based participatory Forums. In this paper, a framework is set out for analysing the democratic effectiveness of Area Forums. This framework sees Area Forums as novel social practice entailing interaction and assesses them against normative characteristics for an effective democratic public sphere; the analysis is applied to a case study of Area Forums in a small English city and finds them lacking in this respect. Aspects of Area Forums may even present barriers to effective participation.     

Equal Employment Opportunity in the Public Service: Theory and Practice in Bangladesh

Although EEO has considerable appeal and is often part of a nation's constitutional and legal framework the application of the principle appears to be far from satisfactory in most cases. Generally the gap between theory and practice of EEO is too wide—especially in developing countries where a range of factors influences the implementation of EEO. As a result, EEO has remained largely elusive in such contexts. This article seeks to contribute to the understanding of EEO in a developing country — Bangladesh—from theoretical and practical terms. Based on mainly secondary sources of information it shows that despite constitutional provisions and the presence of various rules and regulations to this effect, there are a variety of ways in which EEO principle is compromised and violated in the public service. It further shows that in recent times the administration of EEO has been frustrated and undermined further given the increasing trends of politicization of the public service and the high incidence of corruption and patronage in its management.     

Discount Rates for the Evaluation of Public Private Partnerships,by David F. Burgess and Glenn P. Jenkins (Eds.)

This article provides a critical overview of Public-Private Partnerships (PPPs) in Russia and Kazakhstan and examines the rationale underpinning such partnerships. The analysis discusses the reasons why governments in Russia and Kazakhstan focus principally on concessions as a form of PPP and goes on to provide a critical assessment of the key approaches and situational factors relating to concessions in these two countries.

The article finds that external globalization impulses pressed Russia and Kazakhstan to align their policies and institutions with western orthodoxy and perceived international best practice. An ever-increasing emphasis on use of PPPs has been a key feature of this alignment. However, the governments of Russia and Kazakhstan have increasingly resorted to concessions as progress with the development and implementation of Western style PPP models has stalled. This article concludes that the governments of Russia and Kazakhstan have demonstrated an overly optimistic approach to PPP and as a result may have substantially understated their overall concessional risks and costs. Features of Russian and Kazakhstani PPP arrangements such as ambiguity in output specification and extensive reliance on government subsidies, combined with lack of expertise of private partners, may significantly decrease concession benefits.     

Political Failure by Agreement: Learning Liberalism and the Welfare State,by Gerhard Wegner

This article explores the validity of the view that collaboration contributes to public value. The analysis is conceptual and uses graphs to develop a formal statement of public value, collaboration, and government dynamics. The concept of the reason-able person is introduced. The ideal state, the ideal partnership, and conditions for collaboration to contribute to public value are derived. Benefit, support, and acceptability are shown to be necessary conditions for public value to be generated by collaboration. These conditions are shown to link to concepts of management, politics, and public administration.     

From Tuscany to Victoria: Some Determinants of Sustainability Reporting by Local Councils

This paper seeks to respond to recent calls by the academic community for studies investigating sustainability reporting by the public sector, as well as for more engagement-based studies of this issue by examining the views of managers within local councils (LC). The objective of this project is to provide insights as to the possible reasons and explanations for the types of sustainability disclosures among a group of local councils operating in Italy and Australia. In particular, an international comparison is undertaken to ascertain the effect of culture on the adoption of sustainability reporting (SR). Evidence is collected from semi-structured interviews with managers and accountants from ten local councils consisting of five from Italy (Tuscany) and five from Australia (Victoria). The findings suggest that although there are available some general policy documents relating to sustainability reporting, councils are left to their own discretion as to what they consider fit under the definition of sustainability and therefore, determine to a large extent, what to report to stakeholders. Moreover, there was a range of legitimacy type behaviours displayed by a number of councils while others were influenced by notions of public sector accountability and transparency. Adopting Hofstede's cultural framework, the research also highlights the relevance of the Italian and Australian cultural settings in shaping the SR practices used by LCs. The findings suggest that differences regarding cultural dimensions, such as ‘power distance’ and ‘uncertainty avoidance’, influence key aspects of SR.     

Politics of Risk-Taking: Welfare State Reform in Advanced Democracies,by Barbara Vis

This article considers the impacts on the public regulation of private business of three key transformations in public management: “towards more targeting of resources” (through more risk-based regulation); “towards a stronger service ethos” (through more customer-centricity); and “towards increased integration” (through more joined-up regulatory organization). Empirical evidence is presented from a program of research focusing on local authority regulation of the businesses sector in England and Wales. The article concludes by reflecting on how such transformations, which are of wide international significance, might be viewed, particularly from a public interest perspective.     

Use of Accounting Information by Mayors in Local Governments

ABSTRACT

The use of accounting information in the public sector is gaining more attention in recent years, both in literature and among politicians. In particular, it is still necessary to shed light looking at those that have responsibility to make the final decision: politicians. This article attempts to help understand the role of accounting information in decisions made by mayors by analyzing the results of a national survey to which Italian mayors responded. The survey questioned mayors about their use of accounting information during the policy cycle. The use of accounting information by mayors is quite varied, especially if we consider the different phases of the political cycle. The clustering of the results led to the identification of three different groups of mayors with respect to different ways of using accounting information.     

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.     

An Exploratory Study into the Understandings and Awareness of Leadership Ethos and Its Inherent Critical Success Factors by Public Sector Officials in the Department of Trade and Industry (DTI) and the Ministry of the National Economy (ECONAT)

ABSTRACT

The purpose of this study is to examine the understandings of public sector leaders about Leadership Ethos (LE) and its inherent Critical Success Factors(CSFs) looking at their application in the public policy implementation process. The study applied an adapted theoretical paradigm on leadership that borrows from the Western and African contexts. In the light of the aim and objective of the study, both the interview schedule and survey questionnaires were used to gather information with regard to LE and its inherent CSFs. In this view, a semi-structured interview schedule was used to guide both interviews with senior public officials - one in the DTI and one in the ECONAT. A survey questionnaire was administered to public officials at middle and lower management levels working and reporting directly to the interviewed senior public officials. The purpose of the questionnaire was to reduce personal biases inherent in the responses of the senior officials, which appear to be a challenge emerging from self-perception assessments. Research findings suggest that leaders at the DTI and the ECONAT do not sufficiently demonstrate an awareness of LE and its inherent CSFs in the practice of leadership. LE enables leaders garner followers’ trust and obtain their consent; encourage followers’ commitment to organisational goals; and introduce and encourage participatory decision making processes as key factors to successful public policy implementation.