Re-election determinants, financial transparency and municipal efficiencyevidence from Spanish local governments

Resumen

This doctoral thesis aims to analyse several key issues related with the local management system, namely, re-election of local governments, financial transparency and municipal efficiency. In order to address these issues, this thesis is structured in three main chapters. Following the introduction, the first chapter reports the analysis, using Bayesian techniques, of the effect of public spending on the probability of re-election of Spanish local governments. Although the literature on political budget cycles is now fairly large, few contributions have explicitly analysed the determinants of re-election of local governments. The use of Bayesian techniques in this context is particularly interesting because, unlike most previous studies, results are not presented as a summary effect such as the average. Rather, our findings show exactly how a given covariate affects the probability of being re-elected. The main results obtained show that, in general, increases in local government spending positively impact on local governments' chances of re-election. Moreover, the capital expenditure over the whole term positively affects re-election probability, although pre-electoral capital expenditure has a stronger effect on the chances of re-election. A further result is that the electorate only rewards increases in current expenditures made in the pre-election period. The second chapter is devoted to examining the financial transparency of the largest Spanish local governments and its determinants by estimating a panel data Tobit model. Using data from the transparency index created by Transparency International - Spain, which measures the degree of financial disclosure through municipal websites, we observe that, in general, transparency levels increased in most local authorities during the period analysed. Results from an analysis of a set of budgetary, political and socio-economic variables that might affect online financial information disclosure show that higher levels of tax revenues and indebtedness lead to a higher level of information dissemination by local managers. Greater levels of political competition in the council and a higher degree of social and political involvement of citizens were also found to raise the level of financial transparency in local administrations. The third chapter analyses the determinants of local government efficiency in a sample of Spanish municipalities, taking into account the presence of spatial interactions among neighbouring municipalities. To do so, first we compute an efficiency index by using the robust order-m methodology. Second, we focus on the importance of socio-economic, political and budgetary factors which might influence efficiency levels. The main results show that a high degree of political competition in the council negatively affects the level of municipal efficiency. Furthermore, efficiency also decreases as tax and grant revenue levels rise and when the reliability of local budgetary statements diminishes. Finally, we analyse the spatial pattern present in our data and, after estimating a spatial autoregressive model, results show that government efficiency of neighbouring municipalities positively affects the local government's own efficiency.