Incentive Schemes for Local Government: Theory and Evidence from Comprehensive Performance Assessment in England

This paper studies Comprehensive Performance Assessment, an explicit incentive scheme for local government in England. Motivated by a theoretical political agency model, we predict that CPA should increase service quality and local taxation, but have an ambiguous effect on the efficiency of service provision. We test these predictions using Welsh local governments as a control group: CPA increased the property tax, and our index of service quality, but had no significant effect on efficiency overall. There is evidence of a heterogenous effect of CPA: CPA impacted more on councils where electoral competition was initially weak, in line with our theory.