Channeling the final Say in Politics
AbstractWe examine how the final say in a sequence of proposals for local public project provision, financing, and redistribution can be channeled towards socially desirable outcomes, thereby breaking the dictatorial power of the last agenda-setter. Individuals are heterogeneous with some citizens benefiting from the public project (winners) and the rest losing (losers) relative to per-capita costs. Our main insight is that a simple ban on subsidies for the proposal-makers can achieve the purpose whenever the first proposal-maker is a winner and the second proposal-maker is a loser. Such a ban induces project winners to make efficient public project proposals that are however coupled with socially undesirable subsidy schemes. The best possible amendment for project losers is then to match the project proposal and to eliminate all subsidies. We further show that two-round proposal-making constitutes the minimal form of political competition yielding first-best outcomes and that restrictions on tax schemes are socially desirable.
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Bibliographic InfoPaper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 12/164.
Length: 42 pages
Date of creation: Aug 2012
Date of revision:
Voters & Elections; Game Theory ; Social Choice & Welfare;
Find related papers by JEL classification:
- Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-03 (All new papers)
- NEP-CDM-2012-09-03 (Collective Decision-Making)
- NEP-POL-2012-09-03 (Positive Political Economics)
- NEP-PPM-2012-09-03 (Project, Program & Portfolio Management)
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