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Electoral Competition as a Determinant of Fiscal Decentralisation

Listed author(s):
  • Mario Jametti
  • Marcelin Joanis

Fiscal decentralization is high on the agenda in policy fora. This paper empirically investigates the underlying causes of Â…fiscal decentralization, based on the predictions of a simple political economy model. We argue that the likeliness that a central government engages in devolution of powers depends in important ways on the political forces that it faces, the theoryÂ’'s main insight being that the central governmentÂ’'s electoral strength should, all else being equal, decrease that governmentÂ’'s share of spending. Consistent with the model'Â’s predictions, empirical results from a panel of democracies support the relevance of political factors as determinants of fiÂ…scal decentralization. The relationship between central government electoral strength and both expenditure and revenue centralization emerges as negative and non-linear.

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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 37 (2016)
Issue (Month): (06)
Pages: 285-300

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Handle: RePEc:ifs:fistud:v:37:y:2016:i::p:285-300
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  1. Marcelin Joanis, 2011. "The road to power: partisan loyalty and the centralized provision of local infrastructure," Public Choice, Springer, vol. 146(1), pages 117-143, January.
  2. Mario Jametti & Marius Brülhart, 2007. "Does Tax Competition Tame the Leviathan?," Working Papers 2007_7, York University, Department of Economics.
  3. Enikolopov, Ruben & Zhuravskaya, Ekaterina, 2007. "Decentralization and political institutions," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2261-2290, December.
  4. Arzaghi, Mohammad & Henderson, J. Vernon, 2005. "Why countries are fiscally decentralizing," Journal of Public Economics, Elsevier, vol. 89(7), pages 1157-1189, July.
  5. Lars P. Feld & Gebhard Kirchgaessner & Christoph A. Schaltegger, 2010. "Decentralized Taxation and the Size of Government: Evidence from Swiss State and Local Governments," Southern Economic Journal, Southern Economic Association, vol. 77(1), pages 27-48, July.
  6. Cadot, Olivier & Roller, Lars-Hendrik & Stephan, Andreas, 2006. "Contribution to productivity or pork barrel? The two faces of infrastructure investment," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1133-1153, August.
  7. Hansjörg Blöchliger & David King, 2006. "Fiscal Autonomy of Sub-Central Governments," OECD Working Papers on Fiscal Federalism 2, OECD Publishing.
  8. Désirée Teobaldelli, 2011. "Federalism and the shadow economy," Public Choice, Springer, vol. 146(3), pages 269-289, March.
  9. Marcelin Joanis, 2008. "Intertwined Federalism: Accountability Problems under Partial Decentralization," Cahiers de recherche 08-22, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
  10. Knight, Brian, 2004. "Parochial interests and the centralized provision of local public goods: evidence from congressional voting on transportation projects," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 845-866, March.
  11. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
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