If there is social capital, good Mayors are re-elected

Are the public more likely to re-elect a mayor who invests in long-term development? Yes, if there is social capital. The Department of Management’s Dr Luca Andriani shares the results of his latest research in collaboration with colleagues Alberto Batinti and Andrea Filippetti.

If a mayor is good, she should be re-elected. Prior research tells us that what distinguishes a “good” mayor from a “bad” mayor is the adoption of long-term oriented and transparent municipal fiscal policies. “Good” mayors re-allocate the municipal budget more towards capital investments (rather than current expenditures) and towards property tax, which is more transparent than a surcharge income tax. However, “good” mayors are not always re-elected. In this study, we argue that social capital might be a key reason. In a context with low social capital, municipal long-run fiscal strategy might not be rewarded.

Social capital generally refers to elements of cooperation, reciprocity and mutual trust regulating relations among members of a community. It is generally expressed through the presence of civically engaged citizens preferring leaders and governments that show credible commitments in taking good care of public resources, in acting efficiently and fairly and that adopt long- rather than short-run political economic strategies.

In this study, we look at the Italian context, as this is characterised by a pronounced economic regional disparity between the southern regions recording low economic growth and high unemployment and the more economically advanced northern regions. Italy is also a country with a large disparity of social capital endowment across regions and municipalities for several institutional and historical reasons (Putnam 1993).

Since the late 1990s, Italy has implemented two significant reforms aiming to bring local public institutions closer to the citizens’ needs and preferences: an electoral reform to appoint local governments and mayors and a fiscal reform towards a more federalist system. These changes have been pursued by economically wealthy regions seeking greater autonomy. They were also advocated as remedies to stimulate those administrations in regions that are less developed and efficient.

We test whether the probability of “good” mayors being rewarded, i.e. re-elected, is influenced by the level of social capital endowment existing in the municipality. We investigate this empirically in 6,000 Italian municipalities over the period 2003-2012. We consider the structural dimension of social capital as one referring to the individual’s involvement in associational activities and social networks. This dimension captures citizens’ prosocial behaviour and individuals’ attitude towards planning capacity and forward-looking decision making

Our results show that “good” mayors are more likely to be re-elected in contexts with more social capital. One can speculate that social capital may favour the reallocation of the municipal fiscal budget towards public investment vis-à-vis current expenditures and towards property tax vis-à-vis surcharge income tax, thus enhancing the efficiency and transparency of local public policy.

What does this mean for policy makers?

These results raise important reflections on the implementations of public policies promoting decentralization.

Fiscal federalism theory claims that decentralization improves the ability of local institutions to tailor specific policies aiming to meet citizens’ demands (e.g., DiazSerrano and Rodríguez-Pose, 2015). This gets reflected in the citizens’ satisfaction (e.g. Espasa et al., 2017; Filippetti and Sacchi, 2016). This study qualifies these results, showing that decentralization works relatively well in the presence of high levels of social capital. In social contexts where individuals value forward-looking and transparent fiscal policies, decentralization promotes better public policies and benefits public sector financial performance.

However, this study also advocates that decentralization policies should be coupled with initiatives to improve the capacity of local institutions to stimulate the accumulation of social capital. This could be pursued through two complementary strategies. Firstly, by employing programmes that favour the capacity-building of civic associations, including organizations for environmental, human, democratic rights. Secondly, by enabling these associations to be more involved in local governance. This can be achieved by providing local associations access to formal and informal avenues for participation, engagement and closer monitoring of local public decision-making process.

This blog is based on the following research paper:

Batinti, A. Andriani, L and Filippetti, A (2019) Local Government Fiscal Policy, Social Capital and Electoral Payoff: Evidence across Italian Municipalities. Kyklos 72(4): 503-526

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Rethinking Britain – How to build a better future

Sue Konzelmann, Reader in Management at Birkbeck, and her colleagues John Weeks and Marc Fovargue-Davies introduce their new book, Rethinking Britain: Policy Ideas for the Many. 

Mind The Gap, London, Underground, Transportation, Uk

Of the nineteen UK governments since the Second World War, only two have torn up the rule book and tried to build a better future, instead of simply recycling the tired slogans and policies of the past. The two governments that did try radical change – not always successfully – were those of Clement Attlee in 1945 and Margaret Thatcher in 1979.  We are therefore well overdue for another major policy rethink, aimed at solving the problems we have now – largely as a consequence of Thatcher’s legacy – rather than endlessly trying to reignite the ideological battles of the past. That’s why we concluded it was high time for Rethinking Britain: Policy Ideas for the Many.

Rethinking Britain is not only for the many – it’s also written by the many. As a result, it doesn’t set out the vision of one or two people, but instead offers the assessment of a wide range of experts, who are working in or studying the areas we cover. We not only set out the problems and suggest policy solutions to address them.  Our aim is to help improve life for people living in today’s Britain.

Between each set of policy ideas, you’ll also find interludes.  These draw upon real-life stories of people in Britain who are experiencing unresolved difficulties that should be considered unacceptable in any developed economy or civilised society – and we suggest how these problems could be solved, too.

“We strongly believe that a society that produces healthy, well educated, strongly motivated people – who have, or can realistically hope for, a good standard of living – will also help to generate a powerful and dynamic economy.”

Although some depressing situations are described, our overall approach is extremely positive. Instead of denying that there are problems – or ignoring them, as many politicians have done – we take a much more “can do” approach to building the society that most of us would want to live in.  That leads to another significant point: Whilst Attlee’s 1945 government put people and society at the centre of its policy ideas, less than forty years later, Thatcher’s administration reversed this, focusing on the individual, privatization and the wealthy. This raises the question: “In whose interests should the economy be run”?

The shift to individualism, private profit maximization and an obsession with “free” markets resulted in serious wealth for the few – and runaway inequality and poverty for the many.  It’s therefore not hard to guess where those contributing to Rethinking Britain are coming from!  We strongly believe that a society that produces healthy, well educated, strongly motivated people – who have, or can realistically hope for, a good standard of living – will also help to generate a powerful and dynamic economy.

The post-1979 dogma – that the British government should play as small a part in the economy as possible – is also misguided. Far too much capital is being used for short-term, speculative purposes, whilst not enough is finding its way into the development of sustainable businesses that provide long term employment and pay decent wages – not the hand to mouth existence of a zero hours contract. In other words, the economy should work for the many, not just the few.

Another theme that runs through Rethinking Britain is the concept of citizenship – where sets of rights and obligations mean that you are indeed part of something bigger than yourself.  This is the polar opposite of Thatcher’s point of view, that there is “no such thing as society”.  Many of her policy ideas were developed in the context of the Cold War – which came to an end thirty years ago; and it’s time for her policy ideas to do the same.

By investing in Britain’s people, we can build a stronger, more cohesive society – which will underpin a more vibrant economy.  Rethinking Britain shows how.

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What drives efficiency in knowledge transfer?

Dr Federica Rossi, lecturer in business economics discusses increasing expectations on universities to demonstrate the positive economic and social impacts of their activities, and her research into measuring the efficiency of their efforts. 

Knowledge transfer is a term used to encompass a broad range of activities to support mutually beneficial collaborations between universities, businesses and the public sector. In the face of demands from funding bodies and ultimately taxpayers, universities all over the world are increasingly expected to demonstrate that their activities have a positive economic and social impact. Direct knowledge transfer to businesses, governments and society in general allows universities to make a visible contribution outside the ‘ivory tower’ of academia and can also help them to raise additional funds.

Measuring efficiency

Since knowledge transfer has become as important as a university’s longstanding commitment to teaching and research, the question of how well they perform this mission has gained prominence. Most universities attempt to measure performance in knowledge transfer, but focus on a quantity of outputs rather than the quality or efficiency. Even studies that measure efficiency tend to focus on a limited set of knowledge transfer activities, like technology through the commercialisation of patent licenses, creation of spin-out companies or research contracting with industry.

However, universities fulfil their knowledge transfer mission through many other activities, which include delivering knowledge-intensive services such as consultancies, clinical tests, prototypes and professional development courses, engaging in informal networks and staff exchanges with industry, contributing to community regeneration programmes and engaging with the public through different media.

Findings

The efficiency of 97 universities in the United Kingdom was measured for a range of knowledge transfer activities: research contracts, consultancies, professional development courses, generation of intellectual property and public engagement. Compared with a restrictive definition of knowledge transfer that only includes research contracts and intellectual property, this broader approach produces a different ranking for the most efficient universities: more universities achieve efficiency, and the distribution of efficiency scores is less skewed.

The universities that increase their efficiency when a broader definition of knowledge transfer is used have a lower share of staff in medicine and natural sciences and a higher share of staff in the arts and humanities; they are less likely to have a university hospital, and are more teaching-intensive. By adopting a broader approach to measuring knowledge transfer, some universities that are less research-oriented and less focused on science and medicine can better demonstrate their efficiency. More efficient institutions have a larger amount of staff and students; they are older, but have a more recently established knowledge transfer office; and they are specialised in a few subject areas (although some diversified universities are also efficient). Research, teaching intensity, and geographical location do not have a significant effect on efficiency.

Implications

The findings suggest that universities with different production models can be equally efficient in generating knowledge transfer outputs, and that research intensity is not a prerequisite for efficiency. Universities can achieve efficiency by adopting a model of knowledge transfer engagement that is consistent with their resources, without needing to replicate the knowledge transfer strategies of prominent institutions whose resources may be very different. By improving their reputation for excellence in specific activities that best fit the institution’s resources, universities may increase their ability to generate further knowledge transfer outputs. In fact, institutional reputation appears to increase knowledge transfer opportunities, with more reputable older, larger and diversified institutions achieving greater efficiency.

Another implication of the findings is that, rather than having an established Knowledge Transfer Office (KTO), what affects efficiency are its practices and policies, and the professionalism of its staff. KTOs therefore need to invest in staff training and in the development of best practices. Developing specialised, subject-specific skills and structures to support knowledge transfer, rather than generic ones may also pay off.

While performance is often measured by looking at outputs, thinking about performance in terms of efficiency helps us recognise that universities work with very different resources, which affects the nature of their knowledge transfer engagement. Changes in the resources available to universities, through potential changes in the rules governing the allocation of public funds, will also change their ability to engage in knowledge transfer.

Policymakers need to think systematically about the effect of changes in funding for research and teaching (for example, the replacement of recurrent grants with competitive funding) on a university’s ability to engage in knowledge transfer. The relationship between funding sources and knowledge transfer strategies, which has been largely unexplored to date, would merit greater attention from both researchers and policymakers.

The detailed empirical analysis on which these results build is presented in:

Rossi, F. (2017) The drivers of efficient knowledge transfer performance: evidence from British universities, Cambridge Journal of Economics.

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