This paper deals with the effects of interference by local governments on the business affairs of publicly owned utilities. A partial model is presented to illustrate the consequences of “democratic control” on the public managers’ effort and the efficiency of local public production. to empirically check the theoretical results, a two-stage data envelopment analysis (DEA) was carried out on a sample of Eastern German water suppliers. the organizational form is used in the regression analysis to measure the degree of municipal control. the results of the OLS- and Tobit regression indicate an efficiency-enhancing effect on organizational forms with less distinctive control options for local politicians.
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