Does Data Disclosure Improve Local Government Performance?

The paper presented in this ZEW Research Seminar exploits the 2014 launch of an open data online platform by the Italian Government as a natural experiment to examine the impact of data disclosure on municipal expenditure and public good provision. Within treated regions, the authors track mayors' daily access to the platform and instrument their engagement using the release dates of newspaper articles covering their neighbours and the platform. The paper finds that municipalities respond to data disclosure by reducing spending, particularly administrative expenditure. Since service provision levels were not yet publicly reported, this reduction in expenditure leads to cuts in service provision, resulting in an overall efficiency loss of about 15-18%. To further explore these effects, the authors conduct an extensive margin analysis comparing municipalities on the border between treated and untreated regions. The results reveal a similar pattern: mayors in treated regions reduce administrative expenditure and only begin improving service provision once the relevant data is published, two years later. These findings align with the principal-agent framework, showing how partial transparency can be worse than none.