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Political Centralization and Government Accountability

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  • Federico Boffa
  • Amedeo Piolatto
  • Giacomo A. M. Ponzetto

Abstract

This article explains why decentralization can undermine accountability and answers three questions: what determines if power should be centralized or decentralized when regions are heterogeneous? How many levels of government should there be? How should state borders be drawn? We develop a model of political agency in which voters differ in their ability to monitor rent-seeking politicians. We find that rent extraction is a decreasing and convex function of the share of informed voters, because voter information improves monitoring but also reduces the appeal of holding office. As a result, information heterogeneity pushes toward centralization to reduce rent extraction. Taste heterogeneity pulls instead toward decentralization to match local preferences. Our model thus implies that optimal borders should cluster by tastes but ensure diversity of information. We also find economies of scope in accountability that explain why multiplying government tiers harms efficiency. A single government in charge of many policies has better incentives than many special-purpose governments splitting its budget and responsibilities. Hence, a federal system is desirable only if information varies enough across regions. JEL Codes: D72, D82, H73, H77.

Suggested Citation

  • Federico Boffa & Amedeo Piolatto & Giacomo A. M. Ponzetto, 2016. "Political Centralization and Government Accountability," The Quarterly Journal of Economics, Oxford University Press, vol. 131(1), pages 381-422.
  • Handle: RePEc:oup:qjecon:v:131:y:2016:i:1:p:381-422.
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    Citations

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    Cited by:

    1. Martín Gonzalez-Eiras & Dirk Niepelt, 2016. "Fiscal Federalism, Taxation and Grants," Working Papers 16.05, Swiss National Bank, Study Center Gerzensee.
    2. Giacomo A. M. Ponzetto & Edward L. Glaeser, 2017. "The political economy of transportation investment," Economics Working Papers 1556, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2017.
    3. Dirk Niepelt, 2018. "Dynamic Tax Externalities and the U.S. Fiscal Transformation in the 1930s," Diskussionsschriften dp1803, Universitaet Bern, Departement Volkswirtschaft.
    4. Gino Gancia, 2014. "Globalization and Political Structure," 2014 Meeting Papers 644, Society for Economic Dynamics.
    5. repec:eee:ecotra:v:13:y:2018:i:c:p:4-26 is not listed on IDEAS
    6. repec:eee:transa:v:105:y:2017:i:c:p:106-122 is not listed on IDEAS
    7. Glaeser, Edward L. & Ponzetto, Giacomo A.M., 2014. "Shrouded costs of government: The political economy of state and local public pensions," Journal of Public Economics, Elsevier, vol. 116(C), pages 89-105.
    8. David Bartolini & Agnese Sacchi & Domenico Scalera & Alberto Zazzaro, 2018. "The closer the better? Institutional distance and information blurring in a political agency model," Mo.Fi.R. Working Papers 146, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    9. Che, Jiahua & Chung, Kim-Sau & Lu, Yang K., 2017. "Decentralization and political career concerns," Journal of Public Economics, Elsevier, vol. 145(C), pages 201-210.
    10. Edward L. Glaeser, 2012. "Urban Public Finance," NBER Working Papers 18244, National Bureau of Economic Research, Inc.
    11. repec:eee:rensus:v:80:y:2017:i:c:p:1372-1388 is not listed on IDEAS

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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