Municipal Structure Matters: Evidence from Government Fiscal Performance

Evidence for the fundamental presumption that municipal structure matters for government performance is smaller and weaker than many might expect. This research contributes evidence to the literature by focusing on how municipal structure affects government fiscal performance. Municipal structure is operationalized by constructing an index on a political‐administrative scale based on seven essential structural characteristics. As the index score increases, the municipal structure becomes less political and more administrative or professional. Theoretically, municipal structure can affect government performance by influencing managerial professionalism, managerial strategy stance, and the relative attention of government officials to managerial accountability and efficiency. The empirical evidence shows that municipalities adopting a structure with an imbalance toward administrative characteristics are more likely to achieve the best fiscal conditions in cash solvency, dependence on intergovernmental revenues, and outstanding debt level. Moreover, municipal structure moderates the influence of external environmental factors on government fiscal conditions.