Electoral Reform and Public Sector Efficiency. Some Evidence From Italian Municipalities

We study the effect of Law 81/1993, which introduced a different electoral rule for the election of the mayor, on the technical efficiency of Italian cities. Since 1993, municipalities below 15,000 inhabitants vote with a single-ballot system, whereas cities above 15,000 inhabitants threshold are subject to a double ballot. We first estimate the technical efficiency in 1994 (taken as a pre-change year), and 1999 and 2004 for a sample of Italian municipalities, through a non-parametric DEA, and then we perform on both input and output oriented efficiency scores a difference-in-differences analysis, through various panel techniques. We find evidence that, after the reform, municipalities voting under a double-ballot show low levels of efficiency compared to cities voting under a single-ballot, by about 16 (input oriented) and 4 percentage points (output oriented). We speculate that the difference in the level of efficiency among cities voting under a different electoral rule is essentially driven by a lower average quality of politicians elected under a double ballot compared to those elected with a single ballot.