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Political Competition, Tax Salience and Accountability: Theory and Some Evidence from Italy

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  • Emanuele Bracco
  • Francesco Porcelli
  • Michela Redoano

Abstract

This paper argues that high political competition does not necessarily induce policy makers to perform better as previous research has shown. We develop a political economy model and we show that when political competition is tight, and elected politicians can rely on more tax instruments, they will substitute salient taxes with less salient ones, which are not necessarily preferable. These predictions are largely confirmed using a dataset on Italian municipal elections and taxes.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-03/cesifo1_wp4167.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4167.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4167

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Keywords: political competition; government; accountability; tax salience;

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  1. Stefano Gagliarducci & Tommaso Nannicini & Paolo Naticchioni, 2007. "Outside income and moral hazard : the elusive quest for good politicians," Economics Working Papers we073218, Universidad Carlos III, Departamento de Economía.
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  4. Massimo Bordignon & Santino Piazza, 2010. "Who do you Blame in Local Finance? An Analysis of Municipal Financing in Italy," CESifo Working Paper Series 3100, CESifo Group Munich.
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  6. Arulampalam, Wiji & Dasgupta, Sugato & Dhillon, Amrita & Dutta, Bhaskar, 2009. "Electoral goals and center-state transfers: A theoretical model and empirical evidence from India," Journal of Development Economics, Elsevier, Elsevier, vol. 88(1), pages 103-119, January.
  7. Besley, Timothy & Smart, Michael, 2007. "Fiscal restraints and voter welfare," Journal of Public Economics, Elsevier, Elsevier, vol. 91(3-4), pages 755-773, April.
  8. James E. Alt & David Dreyer Lassen, 2003. "Fiscal Transparency and Fiscal Policy Outcomes in OECD Countries," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 03-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  9. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and taxation: theory and evidence," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2009-11, Board of Governors of the Federal Reserve System (U.S.).
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  14. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, Elsevier, vol. 142(2), pages 615-635, February.
  15. Amy Finkelstein, 2009. "E-ZTAX: Tax Salience and Tax Rates," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(3), pages 969-1010, August.
  16. Besley, Timothy, 2007. "Principled Agents?: The Political Economy of Good Government," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199283910, October.
  17. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, Econometric Society, vol. 46(1), pages 69-85, January.
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  19. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  20. Faguet, Jean-Paul, 2004. "Does decentralization increase government responsiveness to local needs?: Evidence from Bolivia," Journal of Public Economics, Elsevier, Elsevier, vol. 88(3-4), pages 867-893, March.
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Cited by:
  1. Sutirtha Bagchi, 2013. "The Effects of Political Competition on the Funding and Generosity of Public-Sector Pension Plans," 2013 Papers, Job Market Papers pba941, Job Market Papers.
  2. Martin Altemeyer-Bartscher, 2014. "Fiscal Equalization, Tax Salience, and Tax Competition," IWH Discussion Papers, Halle Institute for Economic Research 3, Halle Institute for Economic Research.

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