Yardstick competition and fiscal disparities: An experimental study

Liddo, Giuseppe Di; Morone, Andrea

doi:10.1016/j.econlet.2017.07.033

Cited by 5 publications

(2 citation statements)

References 9 publications

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“…Provided re-election probabilities are not aligned with rents, incumbents extracting higher rents are, yet, more likely to be confirmed in office. The existence of a bias, due to differences in revenue capacity and/or expenditure needs, seems to be corroborated by the outcome of some recent laboratory experiments (Di Liddo and Morone, 2017).…”

Section: Introductionmentioning

confidence: 69%

Asymmetric Yardstick Competition: Traditional Procurement Versus Public-Private Partnerships

Liddo

Vinella

2019

SSRN Journal

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We investigate yardstick competition between local jurisdictions in which pure rent-seeking incumbents undertake an identical infrastructure project choosing be-tween two contractual arrangements with different financing profiles, namely traditional procurement (TP) and publicprivate partnership (PPP). We show that a mixed regime, in which TP is used in one jurisdiction and PPP in the other, is likely to arise when projects are mildly lucrative, and/or jurisdictions have a moderate fiscal capacity. We find that, in the mixed equilibrium, incumbents provide different levels of public services, face different probabilities of re-election, and obtain different rents. The adoption of different forms of project governance permits incumbents to disguise themselves and undermine voters' ability to assess their performances. Therefore, yardstick competition is hindered, even if jurisdictions display identical revenue capacities. JEL-Codes: D720, H770.

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Section: Introductionmentioning

confidence: 69%

Asymmetric Yardstick Competition: Traditional Procurement Versus Public-Private Partnerships

Liddo

Vinella

2019

SSRN Journal

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“…When incumbents do not face the same expected rent, given the respective probabilities of re-election, and, hence, the ratio between rents is different from the ratio between probabilities, political yardstick competition is biased. The existence of a bias, due to differences in revenue capacity and/or expenditure needs, seems to be corroborated by the outcome of some recent laboratory experiments (Di Liddo and Morone 2017).…”

Section: Introductionmentioning

confidence: 70%

Asymmetric yardstick competition: traditional procurement versus public-private partnerships

Liddo

Vinella

2021

Ital Econ J

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We consider local jurisdictions where rent-seeking administrators undertake identical infrastructure projects, choosing between two contractual arrangements: traditional procurement (TP) and public-private partnership (PPP). A yardstick competition mechanism is triggered through retrospective voters’ electoral decisions. A regime with TP in one jurisdiction and PPP in the other is likely to arise when projects are mildly lucrative and/or jurisdictions have moderate fiscal capacity. In this equilibrium, incumbents provide different levels of public services, face different re-election probabilities, and obtain different rents. By differentiating the project governance, incumbents specialize in rent extraction over time, thus hindering yardstick competition although jurisdictions are otherwise identical.

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Quality of institutions, rent-seeking, and inter-jurisdictional cooperation

Di Liddo,

Giuranno

2024

Const Polit Econ

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The differing fiscal needs of municipalities introduce bias into yardstick competition among local administrators driven by pure rent-seeking motives. The influence of institutional quality on this bias varies across cases, sometimes alleviating it, while in other instances exacerbating it. Inter-municipal cooperation provides incumbents with control over political yardstick competition. However, this alliance compromises the quality of public services when rent extraction is a priority. To address the issue of collusion and enhance accountability, the central government may find it counterproductive to uniformly improve institutional quality across all districts. Instead, a more effective approach may involve targeted policy interventions in specific districts, considering the varying levels of fiscal and institutional disparities. By doing so, the central government can disrupt the incentive for collusion and rent extraction among local incumbents.

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Yardstick competition and fiscal disparities: An experimental study

Cited by 5 publications

References 9 publications

Asymmetric Yardstick Competition: Traditional Procurement Versus Public-Private Partnerships

Asymmetric Yardstick Competition: Traditional Procurement Versus Public-Private Partnerships

Asymmetric yardstick competition: traditional procurement versus public-private partnerships

Quality of institutions, rent-seeking, and inter-jurisdictional cooperation

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