BUREAUCRACY, EFFICIENCY, AND LOCAL PUBLIC CHOICE: AN EMPIRICAL TEST OF SOME NEW IMPLICATIONS OF BUREAUCRATIC PUBLIC SERVICE PROVISION (PRINCIPAL, AGENT)

This study has two major themes. Theoretically, it unifies three competing theories of local public choice into one more general model and develops new empirical implications from these theories. Empirically, the paper contains a test of this new model (and its three subcases) using expenditure data for 115 small and medium-sized Michigan cities. The data confirm the existence of significant bureaucratic influence on the expenditures of these cities.;This model is tested empirically by examining the responses of cities to changes in revenue sharing receipts and population levels when factors such as median income, density, and the median voter's tax share are held constant. When total expenditures are examined, the bureaucratic theories (especially the budget-maximizing case) offer a superior explanation of the facts in comparison with the median voter model. Capital expenditures appear to be heavily influenced by department heads, while current expenditures are not significantly affected.;The model developed in this study relaxes the assumptions inherent in the orthodox median voter model that the voter (or his elected representative) can simply dictate the amount of output to be produced, and that he can ascertain the true minimum cost of producing that output. Instead, the city departments that actually produce public goods are assumed to have an information advantage over the city council in knowing the actual minimum cost of output. The heads of these departments (the bureaucrats) utilize this information for their own purposes, either to "pad" the city's budget for unnecessary expenses (such as higher salaries and additional staff) or to increase each department's output and total budget. The study develops the empirical implications resulting from different assumptions about (1) the extent of the bureaucrats' information advantage, and (2) the preferences of these bureaucrats over different kinds of inefficiency. One important new implication of the bureaucratic paradigm is the explanation of "flypaper effects," in which lump-sum intergovernmental grants generate more expenditures than increases in the median voter's income. Under these theories, flypaper effects can occur because increases in income improve the voter's bargaining position with respect to city departments while increases in aid do not.