incentives to add employees are not changed for the new political leaders. Amalgamation objectives are more likely to be achieved if they are realistic, clearly stated, and given appropriate support in the form of resources and personnel. Also, the objectives of different actors in the public choice model may make it desirable to identify means such as cooperation as options for achieving consolidation-like benefits.

# _<u>Political Competition and Government Performance</u>_

Earlier, competition among governments was found to affect service quality and resource allocation. Given the public choice argument that politicians are seeking to maximize their own objectives, one might expect political competition to have an impact on government performance. Indeed, Grossman and West (1994) find that increasing vertical government competition through greater decentralization leads to more collusion among local governments. Transfers from higher levels of government are used as instruments to punish local jurisdictions that offer services at too low a tax price. In this case, local governments are larger than they would be under competitive circumstances, although the overall effect of decentralization is to reduce government size. In the above scenario, the actions of bureaucrats and political leaders do not offset all of the benefits from decentralization and increased competition, but they do limit the benefits.

Lassen (2001) presents an alternative view. His argument is that citizens will be more willing to supply revenues for government services and governments will be larger when governments are more transparent and citizens can punish unwanted behavior. Applying 1995 data from 62 democratic countries, Lassen finds that greater political accountability is associated with higher general government tax revenues. In addition, more monitoring activity has been associated with greater efficiency (cost, technical, and allocative) in police departments and public schools.<sup>36</sup> Theoretical studies have provided another argument for competition to increase government size, as concentrated political power has been associated with monopolistic behavior and smaller government.<sup>37</sup> Amalgamation, in this case, would lead to inefficiently low levels of government service provision. Despite this efficiency loss amalgamation can be defended on other grounds. For instance, Baber and Sen (1986) find that concentrated political power leads to smaller increases in debt-financed spending prior to an election.

As with the case of government competition, there is not a consistent effect of political competition on government size. More competition may reduce government spending as jurisdictions compete for residents. On the other hand, increased competition may create more transparency and consequently cause citizens to vote for tax increases, as they are more confident that money is being spent in a desirable manner. The tendency for highly politically concentrated governments to behave in a monopolistic

> 36 Davis and Hayes (1993), Hayes and Wood (1995), Hayes, Razzolini, and Ross (1998), Grosskopf et al.

> (2001), and Duncombe, Miner, and Ruggiero (1997).

> 37 Anderson and Tollison (1988), and Rogers and Rogers (1995).

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