In the Shadow of Sunshine Regulation: Considering Disclosure Biases

Conference Presentation

Reference

In the Shadow of Sunshine Regulation: Considering Disclosure Biases

BOLOGNESI, Thomas, PFLIEGER, Géraldine

BOLOGNESI, Thomas, PFLIEGER, Géraldine. In the Shadow of Sunshine Regulation:

Considering Disclosure Biases. In: Swiss Political Science Association , Geneva (Switzerland), 6th Feb, 2018

Available at:

http://archive-ouverte.unige.ch/unige:103424

Disclaimer: layout of this document may differ from the published version.

Introduction Theory and assumptions Methodology Results Discussion

In the Shadow of Sunshine Regulation

Considering Disclosure Biases

T. Bolognesi G. Pflieger

University of Geneva, Political Sciences Dep.

Institute For Environmental Sciences, GEDT [email protected], [email protected]

Swiss Political Science Association 06.02.2018

Project InfraGouv :http://p3.snf.ch/project- 169521

Introduction Theory and assumptions Methodology Results Discussion

Motivations

1. Massive increase in the use of performance indicators

•

Modernization of public utilities

& New Public Management

•

Principal-Agent Dilemma

2. Sunshine regulation limitations

•

Empirical assessments : small average effect

•

Performance paradox

3. Limitations of limitations : what disclosure process ?

•

Methodology : a measurement error

•

There are disclosure biases

Introduction Theory and assumptions Methodology Results Discussion

Motivations

1. Massive increase in the use of performance indicators

•

Modernization of public utilities

& New Public Management

•

Principal-Agent Dilemma

2. Sunshine regulation limitations

•

Empirical assessments : small average effect

Gerrish, 2016; Heckman et al., 1997; Witte and Saal, 2010)

•

Performance paradox

3. Limitations of limitations : what disclosure process ?

•

Methodology : a measurement error

•

There are disclosure biases

Introduction Theory and assumptions Methodology Results Discussion

Motivations

1. Massive increase in the use of performance indicators

•

Modernization of public utilities

& New Public Management

•

Principal-Agent Dilemma

2. Sunshine regulation limitations

•

Empirical assessments : small average effect

Gerrish, 2016; Heckman et al., 1997; Witte and Saal, 2010)

•

Performance paradox

3. Limitations of limitations : what disclosure process ?

•

Methodology : a measurement error

•

There are disclosure biases

Introduction Theory and assumptions Methodology Results Discussion

Black box : disclosure process

They use the snaffle and the curb all right, but where’s the bloody horse ?

(Roy Campbell - On Some South African Novelists)

Introduction Theory and assumptions Methodology Results Discussion

Theory and assumptions

Research question

Which behavioral mechanisms could explain disclosure biases in sunshine regulation ?

2 hypotheses

Causes Behavior Literature

Opportunism (H

) Cream-skimming

Over-estimation

Free-riding

Transaction costs (H

) Uncertainty

Non feasibility

Introduction Theory and assumptions Methodology Results Discussion

Theory and assumptions

Research question

Which behavioral mechanisms could explain disclosure biases in sunshine regulation ?

2 hypotheses

Causes Behavior Literature

Opportunism (H

) Cream-skimming

Over-estimation

Free-riding

Transaction costs (H

) Uncertainty

Non feasibility

Introduction Theory and assumptions Methodology Results Discussion

Theory and assumptions

Research question

Which behavioral mechanisms could explain disclosure biases in sunshine regulation ?

2 hypotheses

Causes Behavior Literature

Opportunism (H

) Cream-skimming

Over-estimation

Free-riding

Transaction costs (H

) Uncertainty

Non feasibility

Introduction Theory and assumptions Methodology Results Discussion

The case : water provision perf. indic. in Grenoble (FR)

• Sunshine regulation

•

17 indicators since 2007

•

modernization and trust

•

Compulsory since 2014

•

“Naming and Shaming” : yes

• The Grenoble metropolitan area

•

53 services within the same institutional environment

•

good water quality, low-cost mobilization and willingness to modernize

Brochet et al. (2016)

Introduction Theory and assumptions Methodology Results Discussion

The case : water provision perf. indic. in Grenoble (FR)

• Sunshine regulation

•

17 indicators since 2007

•

modernization and trust

•

Compulsory since 2014

•

“Naming and Shaming” : yes

• The Grenoble metropolitan area

•

53 services within the same institutional environment

•

good water quality, low-cost mobilization and willingness to modernize

Brochet et al. (2016)

Introduction Theory and assumptions Methodology Results Discussion

The case : water provision perf. indic. in Grenoble (FR)

• Sunshine regulation

•

17 indicators since 2007

•

modernization and trust

•

Compulsory since 2014

•

“Naming and Shaming” : yes

• The Grenoble metropolitan area

•

53 services within the same institutional environment

•

good water quality, low-cost mobilization and willingness to modernize

Brochet et al. (2016)

Introduction Theory and assumptions Methodology Results Discussion

The Data

• Dependent variable : disclosure biases

•

revealed VS current perf.

(795 obs.)

•

4 outcomes : correct (16%), dist (28%), NR (41%), NA (15%)

• Independent variables

•

Indicators : themes, methods, nb of inputs

•

Services : management, conditions of supply

Introduction Theory and assumptions Methodology Results Discussion

The Data

• Dependent variable : disclosure biases

•

revealed VS current perf.

(795 obs.)

•

4 outcomes : correct (16%), dist (28%), NR (41%), NA (15%)

• Independent variables

•

Indicators : themes, methods, nb of inputs

•

Services : management, conditions of supply

Introduction Theory and assumptions Methodology Results Discussion

The Data

• Dependent variable : disclosure biases

•

revealed VS current perf.

(795 obs.)

•

4 outcomes : correct (16%), dist (28%), NR (41%), NA (15%)

• Independent variables

•

Indicators : themes, methods, nb of inputs

•

Services : management, conditions of supply

Marques et al., 2015; Pflieger and Ecoffey, 2011)

Introduction Theory and assumptions Methodology Results Discussion

Identification

Specifications of expected behaviors

Causes Behaviors Outcomes identification

Opportunism cream-skimming

theme

over-estimation

theme free-riding

price Transaction costs uncertainty

inputs, meth

non-feasibility

inputs, meth controls : mngmnt, m

/km/d, mains/km, hab/km, size

cluster by services

• Checks robustness to

and

Introduction Theory and assumptions Methodology Results Discussion

Identification

Specifications of expected behaviors

Causes Behaviors Outcomes identification

Opportunism cream-skimming

theme

over-estimation

theme free-riding

price Transaction costs uncertainty

inputs, meth

non-feasibility

inputs, meth controls : mngmnt, m

/km/d, mains/km, hab/km, size

cluster by services

• Checks robustness to

and

Introduction Theory and assumptions Methodology Results Discussion

Results

NA DIST NR Hyp

Transaction costs

nbinput -0.0594 -0.521

-0.329

×

meth_f 14.17

-1.226 -0.649 meth_report 14.77

-3.958

-2.291

Opportunism

price 0.0352 14.96

17.50

th_cust 1.166 4.038

1.332

X

th_finance 2.597

3.937

2.266

th_network -0.131 4.231

3.464

Control & cluster

Intercept -13.74

3.034

1.427

∗ p<

0.05,

0.01,

0.001 N = 675 ; Pseudo

= 0.272

Multinomial model, base outcome= “Correct”

Introduction Theory and assumptions Methodology Results Discussion

Discussion

1. Transaction costs open rooms for maneuver

Track TC

2. Other behaviors ?

3. Mode of management and behaviors

0.51Pr(NA)

1 2 3

pop NA

0.51Pr(NR)

1 2 3

pop NR

0.51Pr(Correct)

1 2 3

pop Correct

0.51Pr(Dist)

1 2 3

pop Dist

Note: pop1 < 2 000 < pop2 < 30 0000 < pop3

Introduction Theory and assumptions Methodology Results Discussion

Discussion

1. Transaction costs open rooms for maneuver

Track TC

2. Other behaviors ?

3. Mode of management and behaviors

0.51Pr(NA)

1 2 3

pop NA

0.51Pr(NR)

1 2 3

pop NR

0.51Pr(Correct)

1 2 3

pop Correct

0.51Pr(Dist)

1 2 3

pop Dist

Note: pop1 < 2 000 < pop2 < 30 0000 < pop3

Introduction Theory and assumptions Methodology Results Discussion

Discussion

1. Transaction costs open rooms for maneuver

Track TC

2. Other behaviors ?

3. Mode of management and behaviors

• Pro-social

motivation

• Resistances to modernization

(Bolognesi et al., 2016; Mumby et al., 2017; Renou, 2017)

Introduction Theory and assumptions Methodology Results Discussion

Discussion

1. Transaction costs open rooms for maneuver

Track TC

2. Other behaviors ?

3. Mode of management and behaviors

• Pro-social

motivation

• Resistances to modernization

(Bolognesi et al., 2016; Mumby et al., 2017; Renou, 2017)

Introduction Theory and assumptions Methodology Results Discussion

Discussion

1. Transaction costs open rooms for maneuver

Track TC

2. Other behaviors ?

3. Mode of management and behaviors

.1.2.3.4.5.6Probability

0 1

Regie Full sample

.1.2.3.4.5Probability

0 1

Regie w/o full disinterest effect

NA NR

Correct Dist

Introduction Theory and assumptions Methodology Results Discussion

Discussion

1. Transaction costs open rooms for maneuver

Track TC

2. Other behaviors ?

3. Mode of management and behaviors

.1.2.3.4.5.6Probability

0 1

Regie Full sample

.1.2.3.4.5Probability

0 1

Regie w/o full disinterest effect

NA NR

Correct Dist

Introduction Theory and assumptions Methodology Results Discussion

Contribution

• Policy and empirics : Pay attention on disclosure biases in sunshine reg

• Methodology : operationalization of information asymmetries (Agency relation)

• Theory : Counter-intuitive with TC

Appendix Références

In the Shadow of Sunshine Regulation

Considering Disclosure Biases

T. Bolognesi G. Pflieger

University of Geneva, Political Sciences Dep.

Institute For Environmental Sciences, GEDT [email protected], [email protected]

Swiss Political Science Association 06.02.2018

Thank you

Appendix Références

Propensity to biases

01234Kernel density

.2 .4 .6 .8 1

Propensity of bias

Full sample Excluding NA

-10-5051015

0 1 2 4 5 6 7 9 15

Sum NA ∑(NR) - ∑(NA)

Appendix Références

Propensity to biases

01234Kernel density

.2 .4 .6 .8 1

Propensity of bias

Full sample Excluding NA

-10-5051015

0 1 2 4 5 6 7 9 15

Sum NA ∑(NR) - ∑(NA)

Appendix Références

Subsampling w/o the “Full disinterest effect”

Nb of inputs Formula Direct reporting

Theme customers Theme finance Theme network price Transaction costs

Opportunism

-10 0 10 20 -10 0 10 20

NR dist

Full Sample w/o Abs. Disinterest

Appendix Références

Tracking transaction costs

(1) (2)

NA NR dist NA NR dist

th_cust 0.755 3.331

1.085

0.919 3.422

1.109

th_finance 2.197

3.277

1.997

2.297

3.430

2.031

th_network 0.693 3.392

2.854

0.925 3.466

2.879

price 1.503 15.41

17.35

1.522 16.03

17.99

hinputpop1 -0.291 -0.609 -0.122 -0.384 -0.837 -0.215 hinputpop2 -1.799 -2.375

-1.269 -1.888 -2.308

-1.241 hinputpop3 -11.17

-13.68

-1.939

-10.51

-13.41

-1.911

meth_f 13.90

0.437 0.376 14.58

0.448 0.379

meth_report 14.73

-1.324

-0.718 15.48

-1.316

-0.732

outsourcing 1.274 0.579 -0.153

bundling -0.924 -0.865 -0.359

Control op Yes Yes

_cons -13.45

0.389 -0.411 -14.56

0.291 -0.214

N

675 645

pseudo

0.236 0.244

t

statistics in parentheses

Appendix Références

Tracking transaction costs

-.20.2.4.6Probability

0 1

Number of variables > 4 Predictive Margins of hinput with 95% CIs

0.2.4.6Probability

0 1

IP is formula

Predictive Margins of meth_f with 95% CIs

NA NR

Correct dist

Appendix Références

Control of services idiosyncrasies

NA Distorsion Non-reporting Transaction costs

nbinput 0.384 0.117 -0.395

meth_f 15.12 0.458 -1.189

meth_report 18.40 0.235 -4.904

Opportunism

th_cust -1.904

-0.994

5.116

th_finance -0.302 -0.190 3.398

th_network -3.788

1.262

3.302

price 0 5.188

-2.398

Control op Yes

Control service Yes

_cons -15.73 -0.965 0.191

N

532 435 600

pseudo

0.333 0.317 0.444

AIC

381.3 479.9 555.3

BIC

569.5 626.6 762.0

t

statistics in parentheses

∗p<

0.05,

0.01,

0.001

Appendix Références

Ayres, I. and Braithwaite, J. (1995). Responsive Regulation : Transcending the Deregulation Debate. Oxford University Press.

Baldwin, R., Cave, M., and Lodge, M., editors (2010).The Oxford Handbook of Regulation. Oxford University Press, 1 edition. DOI :

10.1093/oxfordhb/9780199560219.001.0001.

Bevan, G. and Hood, C. (2006). What’s Measured Is What Matters : Targets and Gaming in the English Public Health Care System.Public Administration, 84(3) :517–538.

Bolognesi, T. (2018).Modernization and Urban Water Governance : Organizational Change and Sustainability in Europe. Palgrave Macmillan UK, London. DOI : 10.1057/978-1-137-59255-2.

Bolognesi, T., Brochet, A., and Renou, Y. (2016). Assessing resistance to public policy tools : insights from water performance indicators in the Grenoble area (France).SSRN Working Paper.

Brochet, A., Bolognesi, T., and Renou, Y. (2016). Caractériser l’étendue des résistances locales aux indicateurs de performance des services d’eau. Le cas de l’agglomération grenobloise.Développement durable et territoires. Économie, géographie, politique, droit, sociologie, 7(3).

Canneva, G. and Guérin-Schneider, L. (2011). National monitoring of water utility performance in France.Water Science & Technology : Water Supply, 11(6) :745.

Chong, E., Huet, F., Saussier, S., and Steiner, F. (2006). Public-Private Partnerships

Appendix Références

Dosi, G. and Egidi, M. (1991). Substantive and procedural uncertainty. Journal of Evolutionary Economics, 1(2) :145–168.

Gerrish, E. (2016). The Impact of Performance Management on Performance in Public Organizations : A Meta-Analysis. Public Administration Review, 76(1) :48–66.

Giauque, D. (2003). New Public Management and Organizational Regulation : The Liberal Bureaucracy.International Review of Administrative Sciences,

69(4) :567–592.

Heckman, J., Heinrich, C., and Smith, J. (1997). Assessing the Performance of Performance Standards in Public Bureaucracies. The American Economic Review, 87(2) :389–395.

Hood, C. and Lodge, M. (2006).The politics of public service bargains : reward, competency, loyalty-and blame. Oxford University Press on Demand.

Laffont, J.-J. and Martimort, D. (2009).The theory of incentives : the principal-agent model. Princeton University Press, Princeton.

Leuz, C. and Wysocki, P. D. (2016). The Economics of Disclosure and Financial Reporting Regulation : Evidence and Suggestions for Future Research. Journal of Accounting Research, 54(2) :525–622.

Marques, R. C., da Cruz, N. F., and Pires, J. (2015). Measuring the sustainability of urban water services.Environmental Science & Policy, 54 :142–151.

Mumby, D. K., Thomas, R., Martí, I., and Seidl, D. (2017). Resistance Redux.

Organization Studies, 38(9) :1157–1183.

Perry, J. L., Hondeghem, A., and Wise, L. R. (2010). Revisiting the Motivational

Appendix Références

Pflieger, G. and Ecoffey, F. (2011). The Cost of Urban Sprawl and its Potential Redistributive Effects : An Empirical Cost Assessment for Water Services in Lausanne (Switzerland).Environment and Planning A, 43(4) :850–865.

Pollitt, C. (2013). The logics of performance management.Evaluation, 19(4) :346–363.

Renou, Y. (2017). Performance indicators and the new governmentality of water utilities in France.International Review of Administrative Sciences, 83(2) :378–396.

Ritz, A., Brewer, G. A., and Neumann, O. (2016). Public Service Motivation : A Systematic Literature Review and Outlook.Public Administration Review, 76(3) :414–426.

Ross, S. A. (1973). The Economic Theory of Agency : The Principal’s Problem.The American Economic Review, 63(2) :134–139.

Van Thiel, S. and Leeuw, F. L. (2002). The Performance Paradox in the Public Sector.Public Performance & Management Review, 25(3) :267–281.

Williamson, O. E. (2005). The Economics of Governance. The American Economic Review, 95(2) :1–18.

Witte, K. D. and Saal, D. S. (2010). Is a little sunshine all we need ? On the impact of sunshine regulation on profits, productivity and prices in the Dutch drinking water sector.Journal of Regulatory Economics, 37(3) :219–242.