Revealed yardstick competition: Local government efficiency patterns in Norway

This paper investigates whether the production efficiency of Norwegian local governments exhibits a spatial pattern that is compatible with the hypothesis of yardstick competition. In order to check whether yardstick competition is really responsible for the observed spatial pattern and rule out alternative theoretical explanations, the paper exploits unique information from a survey on local politicians' attitudes towards comparative evaluation of local bureaus' performances against other jurisdictions' (benchmarking). Merging the latter information with the observed interdependence in efficiency, the paper provides evidence that comparative performance evaluation generates positive spatial auto-correlation in local efficiency indicators.