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Voting in federal elections for local public goods in a fiscally centralized economy

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  • Ikuho Kochi

    (Universidad Autónoma de Ciudad Juárez)

  • Raúl A. Ponce Rodríguez

    (Universidad Autónoma de Ciudad Juárez)

Abstract

In this paper we develop a probabilistic voting model of inter-gov\-ern\-men\-tal transfers to explain the distribution and size of local public goods. We find that: i) The parties’ political competition for votes induces the central government to provide regional transfers that lead to Pareto efficient local public goods with and without inter-regional spillovers. ii) The central government has political incentives to produce differentiated and uniform local public goods. Moreover, we provide a comparative analysis to study the influence of political competition, the extent of inter-regional spillovers of local public goods, and the distribution of the population in the economy on the size and distribution of local public spending.

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Bibliographic Info

Article provided by El Colegio de México, Centro de Estudios Económicos in its journal Estudios Económicos.

Volume (Year): 26 (2011)
Issue (Month): 1 ()
Pages: 123-149

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Handle: RePEc:emx:esteco:v:26:y:2011:i:1:p:123-149

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Web page: http://www.colmex.mx/centros/cee/
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Keywords: inter-governmental transfers; size of government; electoral competition;

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References

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  1. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  2. Michael Smart, 1998. "Taxation and Deadweight Loss in a System of Intergovernmental Transfers," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 189-206, February.
  3. Hettich,Walter & Winer,Stanley L., 2005. "Democratic Choice and Taxation," Cambridge Books, Cambridge University Press, number 9780521021807, April.
  4. Khemani, Stuti, 2003. "Partisan politics and intergovernmental transfers in India," Policy Research Working Paper Series 3016, The World Bank.
  5. John E. Roemer, 1997. "Political-economic equilibrium when parties represent constituents: The unidimensional case," Social Choice and Welfare, Springer, vol. 14(4), pages 479-502.
  6. Sam Bucovetsky & Michael Smart, 2006. "The Efficiency Consequences of Local Revenue Equalization: Tax Competition and Tax Distortions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(1), pages 119-144, 01.
  7. Boadway,Robin & Shah,Anwar, 2009. "Fiscal Federalism," Cambridge Books, Cambridge University Press, number 9780521518215, April.
  8. Lockwood, Ben, 1998. "Distributive Politics and the Costs of Centralization," CEPR Discussion Papers 2046, C.E.P.R. Discussion Papers.
  9. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-33, November.
  10. Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
  11. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65, pages 135.
  12. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
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