Given the temptation by government officials to use some of their budget for "perks," residents face the problem of inducing officials to reduce such "waste." The threat to vote out of office officials who perform poorly is one possible response. In this paper, we explore how the competition for residents induced by fiscal decentralization affects "waste" in government. We find that such competition reduces waste, raises the utility of residents, and increases the desired supplies of public goods (potentially above the levels that jurisdictions would choose if they could coordinate). These results are in sharp contrast to the presumed effects from "tax competition," and suggest an additional advantage of fiscal decentralization. Copyright 2003 Blackwell Publishing Inc..
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Volume (Year): 5 (2003)
Issue (Month): 2 (04)
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References listed on IDEAS
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- Glaeser, Edward L, 1996.
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"Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition,"
NBER Working Papers
4041, National Bureau of Economic Research, Inc.
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- John Anderson & Hendrik van den Berg, 1998. "Fiscal Decentralization and Government Size: An International Test for Leviathan Accounting for Unmeasured Economic Activity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(2), pages 171-186, May.
- Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
- Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May.
- Hoxby, Caroline M., 1999. "The productivity of schools and other local public goods producers," Journal of Public Economics, Elsevier, vol. 74(1), pages 1-30, October.
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