Executive Performance under Direct and Hierarchical Accountability Structures: Theory and Evidence

Abstract

This paper shows that when an executive has more policy expertise than the community that hired him, the particular institution used to monitor executive power is critical for promoting good performance. The contrast is between two basic accountability mechanisms: popular election of the executive (direct) and appointment by a popularly elected legislature (hierarchical). I develop a principal(s)-agent(s) model where a homogeneous community seeks to control a better informed executive in the face of adverse selection and moral hazard problems. The model predicts, perhaps unintuitively, that in the presence of expertise asymmetry hierarchical control can improve executive performance to a larger extent than direct control. First, by insulating the executive from popular opinion, thus reducing the good types' incentive to pander to an uninformed public; and second, because the executive is made accountable to a more informed principal, the legislature, thus improving the quality of monitoring bad executive types. The superiority of hierarchical control over direct control is more evident when policy issues are complex (as opposed to simple) and when the legislature is independent of the executive. I present evidence from U.S. municipal elections during 1970-1999 supporting the theoretical prediction that elected executives will manipulate simple policy issues for electoral purposes more so than appointed executives.

Politicians, bureaucrats and targeted redistribution

“…Maskin and Tirole (2004) argue that politicians follow more closely the preferences of the general population compared to their appointed counterparts, but are more likely to pander to public opinion and choose popular actions even when they know that they are not in the general interest of the society. A similar argument is developed in Vlaicu (2008). Alesina andTabellini (2007a, 2007b) provide a general theoretical framework to analyze the criteria that guide the allocation of policy tasks to directly elected politicians or appointed bureaucrats.…”

“…These results suggest that patronage considerations drive the di¤erence for all full-time public employees, but for public employees in police protection (both full-and part-time) there is an additional e¤ect described in Vlaicu (2008).…”

“…3 However, two recent papers are more closely related to the issue of targeted redistribution. Levin and Tadelis (2008) …nd that cities with appointed chief executives are more likely to privatize provision of public services, whereas Vlaicu (2008) …nds pronounced electoral cycles in police o¢ cer hiring in mayorcouncil cities that are absent in council-manager cities. The results in these two papers are fully consistent with the claim that appointed chief executives are less likely to be engaged in targeted redistribution and are discussed in greater details below.…”

“…More importantly, the results indicate that the di¤erence increases by an additional 2 to 4 percent during the election years. 13 Vlaicu (2008) argues that the number of police o¢ cers can exhibit political cycles not because there are 1 2 Other control variables used in the previous analysis could not be included in this analysis since they are not available on a yearly basis.…”

Does Separation of Powers Promote Stability and Moderation?

“…Although the electoral consequences of the first-period choice might make different levels of extremism more or less attractive, and might likewise affect the strength of a party's interest in insulating its measures from future repeal, so long as those effects are not so large that they swamp all other considerations, then the qualitative results identified in the simplified model presented here would continue to obtain, though perhaps in attenuated (or enhanced) form. 14 If the first-period government enacted the statute, the second-period government can choose 11 Other contributions explore how separation-of-powers interacts with electoral incentives (Fox and Van Weelden 2010;Persson, Roland and Tabellini 1997;Stephenson and Nzelibe 2010;Vlaicu 2008); the analysis in this paper can be seen as complementary to these efforts, though fully integrating their insights is a task for future research.…”