The Political Competition-Economic Performance Puzzle: Evidence from the OECD Countries and the Italian Regions
AbstractEmpirical tests of the theories on the relationship between political competition and economic performance generate a puzzle: data tend to support the theory at the lower levels of government, but not in panels of countries. We argue that the larger set of policy instruments reduces the tax price of votes at the national level, increasing the incentives to use distortionary redistributive policies to win contested elections. Moreover, constitutions reserve competencies with a high ideological potential to the national government, reducing swing voters’ responsiveness to the economic performance of the central government. We thus expect political competition to produce efficiency-oriented policies at the sub-national level compared to the national one. We test this hypothesis on a panel of 24 OECD countries over 1974-2000 and a panel of 15 Italian regions over 1984-2000 and find support for our predictions.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2411.
Date of creation: 2008
Date of revision:
political competition; growth; redistribution; national and regional government;
Find related papers by JEL classification:
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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