Do rival political parties enforce government efficiency? Evidence from Canada 1867–2021

This paper investigates the role of inter-party rivalry in enhancing federal government efficiency in post-Confederation Canada. It tests and finds confirmation in the data for two hypotheses. The first is that the ex post size of the first versus second seat share margin is a useful metric for the ineffectiveness of political parties in policing the incumbent's spending behaviour over its period of tenure. The second is the hypothesis that shirking by the incumbent governing party is decreased by greater expected electoral contestability and expected contestability is related to the effective number of competing parties (ENPSeats) nonmonotonically. In this regard the results suggest that contestability in Canada reaches a maximum when the incumbent faces a value of ENPSeats that is closer to 2.5 than Duverger's 2.     

Debt maturity and firm productivity—The role of intangibles

Does the maturity of debt matter for productivity? Using data on Italian firms from 1997 to 2015, we study the relationship among debt maturity, productivity, and firm characteristics. We find that productivity is positively associated with short-term debt and negatively associated with long-term debt. This result supports the hypothesis that the less intense monitoring of firm performance and fewer liquidation fears stemming from the long maturity of debt causes a moral hazard, while short-term debt serves as a disciplinary device to improve firm performance in the short run. This effect is evident in small- and medium-sized enterprises and old firms. In contrast, large firms can utilize long-term financing to improve productivity through long-term investments. Firms improve productivity by purchasing intangible assets financed by short-term debt.