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Political Centralization and Government Accountability

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  • Federico Boffa
  • Amedeo Piolatto
  • Giacomo Ponzetto

Abstract

This paper studies fiscal federalism when regions differ in voters' ability to monitor public officials. We develop a model of political agency in which rent-seeking politicians provide public goods to win support from heterogeneously informed voters. In equilibrium, we find that voter information increases government accountability but displays decreasing returns. Therefore, political centralization reduces aggregate rent extraction when voter information varies across regions. When the central government sets a uniform national policy, each region benefits in inverse proportion to its residents' ’information. We test this prediction using panel data on pollution and newspaper circulation across the United States. The 1970 Clean Air Act centralized environmental policy at the federal level. Consistent with our theory, we find that less informed states benefited from a faster decrease in pollution after centralization.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 656.

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Date of creation: May 2014
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Handle: RePEc:bge:wpaper:656

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Keywords: political centralization; government accountability; imperfect information; interregional heterogeneity; elections; environmental policy; air pollution;

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  1. Durante, Ruben & Labartino, Giovanna & Perotti, Roberto, 2011. "Academic Dynasties: Decentralization and Familism in the Italian Academia," CEPR Discussion Papers 8645, C.E.P.R. Discussion Papers.
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  3. Giacomo Ponzetto, 2011. "Heterogeneous Information and Trade Policy," Working Papers 596, Barcelona Graduate School of Economics.
  4. Greenstone, Michael, 2004. "Did the Clean Air Act cause the remarkable decline in sulfur dioxide concentrations?," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 585-611, May.
  5. List, John A. & Gallet, Craig A., 1999. "The environmental Kuznets curve: does one size fit all?," Ecological Economics, Elsevier, vol. 31(3), pages 409-423, December.
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  11. Michael Greenstone & John A. List & Chad Syverson, 2012. "The Effects of Environmental Regulation on the Competitiveness of U.S. Manufacturing," NBER Working Papers 18392, National Bureau of Economic Research, Inc.
  12. Erwin Bulte & John A. List & Mark C. Strazicich, 2004. "Regulatory Federalism and the Distribution of Air Pollutant Emissions," Working Papers 04-16, Department of Economics, Appalachian State University.
  13. Fan, C. Simon & Lin, Chen & Treisman, Daniel, 2009. "Political decentralization and corruption: Evidence from around the world," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 14-34, February.
  14. John A. List & Shelby Gerking, 2000. "Regulatory Federalism and Environmental Protection in the United States," Journal of Regional Science, Wiley Blackwell, vol. 40(3), pages 453-471.
  15. Fredriksson, Per G & Gaston, Noel, 2000. "Environmental Governance in Federal Systems: The Effects of Capital Competition and Lobby Groups," Economic Inquiry, Western Economic Association International, vol. 38(3), pages 501-14, July.
  16. John J. Wallis & Price V. Fishback & Shawn E. Kantor, 2006. "Politics, Relief, and Reform. Roosevelt’s Efforts to Control Corruption and Political Manipulation during the New Deal," NBER Chapters, in: Corruption and Reform: Lessons from America's Economic History, pages 343-372 National Bureau of Economic Research, Inc.
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