Partisan bias, electoral volatility, and government efficiency

Electoral agency models suggest that government efficiency improves when voters penalize poor performance, and party competition is balanced. Uncertainty in the electoral mechanism dilutes the incentive to produce efficiently. We test this proposition using panel data on local governments. The dataset includes a broad set of indicators on service output and quality, which facilitates the measurement of cost efficiency. We use historical data on local voting in national elections to measure partisan bias, while electoral volatility is measured on past variations in neighboring municipalities. The empirical analyses show that partisan bias lowers cost efficiency, particularly in municipalities with large electoral volatility. (C) 2015 Elsevier Ltd. All rights reserved.