Public Sector Efficiency: The Roles of Political and Budgetary Institutions, Fiscal Capacity and Democratic Participation

Abstract

The purpose of this paper is to investigate whether efficiency in public service provision is affected by political and budgetary institutions, fiscal capacity, and democratic participation. In order to address this issue we take advantage of a new global efficiency measure for Norwegian local governments. There is strong evidence that high fiscal capacity and a high degree of party fragmentation contributes to low efficiency. In addition we find that increased democratic participation tends to increase efficiency, while a centralized top down budgetary process is associated with low efficiency.Public sector efficiency; Political and budgetary institutions; Fiscal capacity; Democratic Participation