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Fiscal Federalism and Electoral Accountability

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  • Aidt, T.
  • Dutta, J.

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.

Suggested Citation

  • Aidt, T. & Dutta, J., 2010. "Fiscal Federalism and Electoral Accountability," Cambridge Working Papers in Economics 1021, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1021
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    More about this item

    Keywords

    Fiscal federalism; local public goods; externalities; performance voting; turnout uncertainty; electoral accountabilit;
    All these keywords.

    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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