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Fiscal Federalism and Electoral Accountability

Author

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  • TOKE S. AIDT
  • JAYASRI DUTTA

Abstract

We study the efficient 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 efficient 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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Suggested Citation

  • Toke S. Aidt & Jayasri Dutta, 2017. "Fiscal Federalism and Electoral Accountability," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(1), pages 38-58, February.
  • Handle: RePEc:bla:jpbect:v:19:y:2017:i:1:p:38-58
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    File URL: http://hdl.handle.net/10.1111/jpet.2017.19.issue-1
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    References listed on IDEAS

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    Cited by:

    1. Abel François & Pierre-Guillaume Méon, 2018. "Politicians at higher levels of government are perceived as more corrupt," Working Papers CEB 18-013, ULB -- Universite Libre de Bruxelles.
    2. Yu-Bong Lai, 2016. "Does Tax Competition Reduce Corruption?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(4), pages 331-356, September.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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