Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition
This paper develops a model of the political economy of tax-setting in a multijurisdictional world where voters' choices and incumbent behavior are determined simultaneously. Voters are assumed to make comparisons between jurisdictions to overcome political agency problems. This forces incumbents into a (yardstick) competition in which they care about what other incumbents are doing. The authors provide a theoretical framework and empirical evidence using U.S. state data from 1960 to 1988. The results are encouraging to the view that vote-seeking and tax-setting are tied together through the nexus of yardstick competition. Copyright 1995 by American Economic Association.
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Volume (Year): 85 (1995)
Issue (Month): 1 (March)
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