Municipalities’ Choices of Service Delivery Modes: The Influence of Service,Political, Governance,and Financial Characteristics

This study investigates the influence of service, political, governance, and financial characteristics on municipalities’ choices of four service delivery modes (in-house, inter-municipal cooperation, municipality-owned firm, and private firm) in the Dutch local government setting. The results show that as a service involves more asset specificity and more measurement difficulty, the likelihood that municipalities contract this service out is lower. Also, although some differences in preferences are found between boards of aldermen and municipal councils, for both political bodies a more right-wing political orientation is shown to be positively related to privatization of services. Furthermore, contracting out is also shown to be related to the governance model of municipalities, as services of municipalities that (in general) put relatively less emphasis on input, process, and output performance indicators, and more on outcome performance indicators, are more likely to be privatized. Finally, the results also show that services of municipalities that have a better financial position are less likely to be contracted out to a private firm.     

Do constitutions matter? Evidence from a natural experiment at the municipality level

This paper asks if it does matter for taxes and government spending whether the mayor is elected (and recalled) by direct election or by the municipal council. It thus contributes to the economic literature on the impact of constitutions on economic outcomes. The effects are identified based on reforms of the municipal constitutions that were exogenous from the point of view of the municipalities in content and timing: each year, quasi-randomly selected groups of municipalities introduced the new constitution. This setup helps overcome endogeneity and identification issues that are common to many studies in the field using country level data. Using a new panel dataset of the 686 municipalities in three German states, this paper shows that direct mayoral election and recall through referendum only (as opposed to election and recall through the municipal council) reduce tax rates and increases spending on government employees.     

Disparities in the Spending Needs of Highland Municipalities

A certain rough consensus holds that highland municipalities have higher spending needs than others, because of the particularly adverse conditions in which they provide essential public services. However, there is no empirical evidence to support this assertion. This study examines whether any relevant differences actually exist in the spending policies of highland and lowland municipalities. To this end, we make logarithmic estimations of per capita municipal spending in order to determine whether the indicators selected, which are based on local government powers, adequately reflect spending needs. Our results point to the special circumstances of highland districts as a key explanatory factor for higher municipal spending, along with demographic factors, locational population patterns, economic activity, subsidies, and local fiscal capacity.     

Is Small Beautiful? Testing the Direct and Nonlinear Effects of Size on Municipal Performance

Although the relationship between managerial capacity and local government performance is well established, research into the direct effect of population size on performance has yielded mixed findings. Using data for 787 municipalities in the Brazilian state of Minas Gerais, this article examines the direct and nonlinear effects (moderating and curvilinear) of population size on municipal performance. Performance is measured in terms of property tax collection and averaged for the 2005–07 mayoral administration. Mayor's age (a proxy for experience) and educational attainment serve as measures of managerial capacity. After controlling for political and economic factors, both municipal size and mayoral capacity are positively correlated with property tax collection. However, population size neither moderates managerial capacity nor relates curvilinearly to municipal performance. These findings challenge the promoters of fragmentation, which has been the trend in transitional and developing economies.     

Explaining Interest Rates in Local Government Borrowing

ABSTRACT

This article analyzes the usefulness of municipal accounting information in the interest rates agreed on by financial institutions in the European context. Most of the literature has focused on municipal bonds, mainly in the United States. Our core contribution is to study which factors determine the interest rates on bank loans to municipalities. This framework is different, since there is neither a secondary bond market nor credit ratings, and therefore information asymmetry is higher. Specifically, we investigate if municipal financial indicators and financial reports’ quality have an influence on interest rates paid by Spanish municipalities in the period 2001–2008. Our empirical results indicate that, in general, the municipal financial situation exerts an influence on the credit policy of lenders, who charge a risk premium to those municipalities with less current surplus, which is an indicator of the municipality's saving ability. Furthermore, there is also some inertia in the municipal annual interest rate (year t ? 1 interest determines around 27% of year t interest). Other findings indicate that high levels of expenditures and debt per capita increase the interest cost of municipal borrowing. Finally, municipalities that disclose full detailed financial reports pay less interest because information asymmetry and transaction costs are lower.     

Big Guys Eat Big Cakes: Firm Size and Contracting in Urban and Rural Areas

ABSTRACT

A great deal of attention has been devoted to the analysis of different levels of privatization in urban and rural areas. However, until now no empirical study has been conducted on what types of firms are present in different geographical environments. We find that large firms that operate on a national basis dominate the contracts in the most populated and urban municipalities, and these firms seem to have closer relationships with nation-wide political parties. On the contrary, small firms that operate at a local level usually have the contracts in the less populated and isolated municipalities. This market structure may be harmful for competition in both types of municipalities, damaging the likelihood of obtaining cost savings from privatization.     

Voter Buying: Shaping the Electorate through Clientelism

Studies of clientelism typically assume that political machines distribute rewards to persuade or mobilize the existing electorate. We argue that rewards not only influence actions of the electorate, but can also shape its composition. Across the world, machines employ “voter buying” to import outsiders into their districts. Voter buying demonstrates how clientelism can underpin electoral fraud, and it offers an explanation of why machines deliver rewards when they cannot monitor vote choices. Our analyses suggest that voter buying dramatically influences municipal elections in Brazil. A regression discontinuity design suggests that voter audits—which undermined voter buying—decreased the electorate by 12 percentage points and reduced the likelihood of mayoral reelection by 18 percentage points. Consistent with voter buying, these effects are significantly greater in municipalities with large voter inflows, and where neighboring municipalities had large voter outflows. Findings are robust to an alternative research design using a different data set.     

Who ‘marries’ whom? The influence of societal connectedness,economic and political homogeneity,and population size on jurisdictional consolidations

For decades, political scientists have been asking how political jurisdictions are formed and reshaped. Nevertheless, studies of local government jurisdictional formation are few and often plagued with endogeneity since the formation of jurisdictions cannot be separated from sorting effects. In this article, the unique case of the Danish structural reform is utilised to overcome endogeneity due to migration‐related sorting by studying patterns of municipal amalgamations. In the recent Danish reform, 239 of 271 municipal entities were forced to amalgamate simultaneously, while who actually amalgamated with whom was left entirely to negotiations between the respective municipalities. Applying logistical regression to a dataset where the unit of analysis is dyads of municipalities allows the construction of a relational model for estimating the effect of different political and societal variables on the likelihood of amalgamation. Societal connectedness, population size and geography are important predictors of amalgamation patterns, while political and economic homogeneity between municipalities does not appear to matter much.     

City-State Ideological Incongruence and Municipal Preemption

A growing concern among municipal officials across the United States is that their policymaking capacity is under attack by state legislatures who are increasingly likely to preempt those municipalities. However, determining the extent to which municipalities are preempted is challenging. We overcome this by surveying a large sample of municipal officials from across the United States. We find that officials from municipalities that are more ideologically distant from their state overall are more likely to report being preempted by their state government. Moreover, this pattern is driven by more liberal municipalities in both Republican and Democratic states reporting higher rates of preemption. Additionally, municipalities under unified state governments are more likely to report preemption, especially those under unified Republican control. These findings have important implications for the quality of representation in our federalist system and indicate that preemption is not just an issue between Republican states and liberal urban cities.     

How to Make Using Two-Way Mechanisms Routine: Testing a Preliminary Model

ABSTRACT

Consistent or continuous use of two-way engagement mechanisms is key to effective citizen participation. This article examines how to make the municipal manager’s use of two-way engagement mechanisms more consistent when they prepare local budgets. To test the model, self-administered mail surveys were compiled from two American states—New Jersey and Pennsylvania. The findings address the role of individual intentionality. The municipal manager’s attitudinal willingness, his perceived ease or difficulty, the trust she receives from elected officials, and the capacity to coordinate effectively are significantly related to his consistent use of two-way engagement mechanisms. However, district representatives and pressures channeled through media scrutiny are not able to compel a municipal manager to routine use of such mechanisms.     

Co-creation of Linking Social Capital in ‘Municipality 3.0’

There is great interest in co-creation of welfare production between municipalities and the civil society in the Nordic countries. Using linking social capital as a theoretical point of departure and examining a qualitative case study in Norway, I critically assess the concepts of co-creation and ‘Municipality 3.0’. It is suggested that even in countries with high trust in the authorities, building linking social capital in the shape of interorganizational networks is a complex process fraught with potential barriers related to trust, network building, municipal resources, and statutory laws and regulations. And while outcomes are promising, they are far from certain.     

Deficits in Local Government Budgets in Israel: A Reflection of Political Cycles and an Expression of Local Autonomy

This article addresses local government budgeting in the context of two Israeli political cycles: the parliamentary election period and the municipal election period. Deficits are not unusual in any of the three types of Israeli localities: municipalities, local councils, and regional councils. And these deficits exhibit a definite pattern; they are largest in election periods. Specific examples are cited to show this hypothesis holds true for all types of localities (including Israel's three largest cities), and for both Jewish and Arab localities as well.     

Common pool effects and local public debt in amalgamated municipalities

This paper investigates whether the large scale municipal amalgamations in the German state of Baden-Wuerttemberg in the early 1970s led to considerable common pool exploitation. Through amalgamation the resources of several municipalities are pooled together disclosing the former independent municipalities a larger source of funds. Additionally, the pooling also decreases the cost of local public goods, as those have to be borne by the whole of the amalgamated municipality. By exploiting the huge variance in the amalgamation process in terms of number of participating municipalities, but also in municipality size or amalgamation strategy, we identify considerable common pool effects. Amalgamated municipalities show considerably stronger acceleration in debt accumulation compared to non-amalgamating municipalities. This common pool exploitation is stronger if more municipalities participate and when municipalities amalgamate by annexation.

     

Accounting for Natural Disasters: The Impact of Earthquake Risk on California Municipal Bond Pricing

While Katrina has raised awareness of the potential impact of hurricanes on municipalities along the Gulf Coast, it remains unclear if the municipal bond market considers other types of natural disaster risk in other areas. We attempt to fill this gap by conducting an analysis to determine if underlying geologic earthquake risk affects interest costs for municipal bond issuers in California. We find that earthquake risk does matter in determining the interest costs for municipalities issuing debt, but not universally—only for municipal bonds issued after Hurricane Katrina and only in relation to underlying geologic earthquake risk.     

The Evolution of E-Government among Municipalities: Rhetoric or Reality?

Information technology has become one of the core elements of managerial reform, and electronic government (e-government) may figure prominently in future governance. This study is designed to examine the rhetoric and reality of e-government at the municipal level. Using data obtained from the 2000 E-government Survey conducted by International City/County Management Association and Public Technologies Inc., the article examines the current state of municipal e-government implementation and assesses its perceptual effectiveness. This study also explores two institutional factors (size and type of government) that contribute to the adoption of e-government among municipalities. Overall, this study concludes that e-government has been adopted by many municipal governments, but it is still at an early stage and has not obtained many of expected outcomes (cost savings, downsizing, etc.) that the rhetoric of e-government has promised. The study suggests there are some widely shared barriers (lack of financial, technical, and personnel capacities) and legal issues (such as privacy) to the progress of municipal e-government. This study also indicates that city size and manager-council government are positively associated with the adoption of a municipal Web site as well as the longevity of the Web site.     

Explaining differences in productive efficiency: An application to Belgian municipalities

The purpose of this paper is to measure and explain variations in productive efficiency of municipal governments in Belgium. Technical efficiency is evaluated using a non-parametric method based on the Free Disposal Hull (FDH) reference technology. We first calculate input, output, and graph Farrell efficiency measures for a cross-section of all 589 Belgian municipalities. In a second stage of the analysis we explain the calculated differences in efficiency in terms of variables related to the structural characteristics of municipalities and to the institutional environment.     

How Municipal Property Tax Responded to State Aid Cuts: The Case of Massachusetts Municipalities in the Post‐2001 Fiscal Crisis

This empirical study examines municipal property tax responses to state aid cuts during the post‐2001 fiscal crisis. Using panel econometric techniques on annual changes in property tax levy by 351 incorporated Massachusetts municipalities in the period of 2002–2006, the results suggest that municipal governments offset about 9 cents of each dollar of net state aid cut through the increase of their property tax rates. It contributes to public finance literature on the extent to which local property tax can be used to stabilize municipal revenues when the intergovernmental revenue shrinks.     

Evaluating California’s Housing Element Law,Housing Equity,and Housing Production (1990–2007)

Since 1969, California’s Housing Element Law has required that municipalities address housing equity and housing production. In California, housing equity means that a municipality has planned for the future production of low-income housing that is priced from 0 to 120% of the U.S. Department of Housing and Urban Development’s median family income, and market-rate housing that is priced higher than 121%. For a purposive sample of municipalities (Sacramento and Los Angeles regions, 1990 to 2007, n = 53), this research found that as compliance with the law increased, the sample experienced deficient low-income housing production but surplus market-rate housing production. Mixed-effects models indicated that compliant municipalities were associated not only with increased low-income housing production but also with decreased annual housing production in comparison to noncompliant municipalities. While these associations contrast with Lewis, they suggest that municipal compliance may support California’s goal of providing housing equity but may also constrain California’s overall housing production.     

Bypassing public procurement regulation: A study of rationality in local decisionmaking

Using private contractors through procurement is common in most public sector areas. Despite the benefits of procurement, officials are sometimes tempted to circumvent procurement regulations. The aim of this article is to examine the strategies used by local governmental decisionmakers to bypass procurement regulations and to analyze the rationality underlying these officials' actions. Interviews, court documents, municipal documents, and newspaper articles describing the actions of Swedish municipal officials concerning special transport service (STS) procurements were collected and analyzed. In a case in which rural municipalities lost regular taxi services after STS procurement, we demonstrate how decisions were driven by pressure from the public and local interest groups, making municipal officials deviate from procurement regulations in striving to secure the existence of regular taxi services. One outcome was that local businesses were given preferential treatment, violating regulations and reducing economic efficiency.     

Consequences of an Anti-Corruption Experiment for Local Government Performance in Brazil

Decentralization reforms, implemented to improve efficiency and service provision, pose a challenge for federal governments that would like to ensure that federal resources are used appropriately by local governments. To overcome this challenge, some federal governments have implemented costly oversight programs aimed at improving municipal governance. For instance, in 2003, the Brazilian federal government introduced a randomized auditing program with the goal of improving municipal performance by exposing episodes of corruption and mismanagement. Yet, we know little about whether these types of programs actually lead to improvements in local outcomes, especially in terms of service delivery. We argue that audits provide opportunities for learning that should improve performance outcomes. To test this argument, we examine municipal performance in over 5,000 Brazilian municipalities from 2001 to 2012. We utilize the random assignment of audits and estimate difference-in-differences regressions. We find that audited municipalities experience greater improvements in performance overall compared to unaudited municipalities, though the effect size is modest. We also find evidence that the auditing program indirectly improves municipal performance. These results indicate that top-down oversight programs, such as the Brazilian one, are useful not only for improving transparency and accountability, but also for the provision of public services as well.