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Fiscal Federalism and Electoral Accountability

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  • Aidt, T.
  • Dutta, J.

Abstract

We study the e¢ cient allocation of spending and taxation authority in a federation in which federal politicians are exposed to electoral uncertainty. We show that centralization may, but need not, result in a loss of electoral accountability. We identify an important asymmetry between positive and negative externalities and show that centralization may not be e¢ cient in economies with positive externalities even when regions are identical and centralization does not entail a loss of accountability. We also show that decentralization can only Pareto dominate centralization in economies with negative externalities.

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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1021.

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Date of creation: 30 Apr 2010
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Handle: RePEc:cam:camdae:1021

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Keywords: Fiscal federalism; local public goods; externalities; performance voting; turnout uncertainty; electoral accountabilit;

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