Spend More, Get More? An Inquiry into English Local Government Performance

Abstract

Based on a unique measure of performance of English local governments in the provision of public services (Comprehensive Performance Assessment, CPA), this paper uses panel data (2002--7) to identify the determinants of performance. In particular, by thoroughly exploiting the features of the British system of local government finance and the mandatory nature of decentralized public service provision, this paper aims at investigating the impact of government spending on public service outcomes. Due to the nature of CPA ratings--measured on a five category (poor to excellent) scale--the empirical work relies on an ordered response approach allowing for cross-sectional heterogeneity. The empirical evidence suggests that local public expenditures in excess of centrally set spending standards have a detrimental effect on performance. Copyright 2010 Oxford University Press 2009 All rights reserved, Oxford University Press.