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Exit and Voice. Yardstick versus Fiscal Competition across Governments

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  • Massimo Bordignon

Abstract

Politicians are disciplined through the electoral system. But this is often not enough to eliminate political rents. Economists suggest that competition across governments may also help. But intergovernmental competition can take two forms, through tax competition (exit) or yardstick competition (voice). We show these two forms may not, and in general do not, work in the same direction. Tax competition may reduce the screening properties of yardstick competition.

Suggested Citation

  • Massimo Bordignon, 2007. "Exit and Voice. Yardstick versus Fiscal Competition across Governments," CESifo Working Paper Series 2069, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2069
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp2069.pdf
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    References listed on IDEAS

    as
    1. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2004. "Yardstick competition in intergovernmental relationships: theory and empirical predictions," Economics Letters, Elsevier, vol. 83(3), pages 325-333, June.
    2. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
    3. Besley, Timothy & Smart, Michael, 2007. "Fiscal restraints and voter welfare," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 755-773, April.
    4. Hindriks, Jean & Lockwood, Ben, 2009. "Decentralization and electoral accountability: Incentives, separation and voter welfare," European Journal of Political Economy, Elsevier, vol. 25(3), pages 385-397, September.
    5. Schultz, Christian, 2008. "Information, polarization and term length in democracy," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1078-1091, June.
    6. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-1235, December.
    7. Salmon, Pierre, 1987. "Decentralisation as an Incentive Scheme," Oxford Review of Economic Policy, Oxford University Press, vol. 3(2), pages 24-43, Summer.
    8. John Douglas Wilson, 1989. "An Optimal Tax Treatment Of Leviathan," Economics and Politics, Wiley Blackwell, vol. 1(2), pages 97-117, July.
    9. Revelli, Federico, 2008. "Performance competition in local media markets," Journal of Public Economics, Elsevier, vol. 92(7), pages 1585-1594, July.
    10. Eggert, Wolfgang & Sørensen, Peter Birch, 2008. "The effects of tax competition when politicians create rents to buy political support," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1142-1163, June.
    11. Bordignon, Massimo & Minelli, Enrico, 2001. "Rules transparency and political accountability," Journal of Public Economics, Elsevier, vol. 80(1), pages 73-98, April.
    12. Lockwood, Ben, 2005. "A Note on the Hybrid Equilibrium in the Besley-Smart Model," The Warwick Economics Research Paper Series (TWERPS) 727, University of Warwick, Department of Economics.
    13. Kotsogiannis, Christos & Schwager, Robert, 2008. "Accountability and fiscal equalization," Journal of Public Economics, Elsevier, vol. 92(12), pages 2336-2349, December.
    14. Massimo Bordignon & Floriana Cerniglia & Federico Revelli, 2002. "In Search for Yardstick Competition: Property Tax Rates and Electoral Behavior in Italian Cities," CESifo Working Paper Series 644, CESifo Group Munich.
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    Cited by:

    1. Revelli, Federico, 2015. "The electoral migration cycle," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201548, University of Turin.
    2. repec:dau:papers:123456789/6913 is not listed on IDEAS

    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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