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The Political Competition-Economic Performance Puzzle: Evidence from the OECD Countries and the Italian Regions

  • Fabio Padovano
  • Roberto Ricciuti

Empirical tests of the theories on the relationship between political competition and economic performance generate a puzzle: data tend to support the theory at the lower levels of government, but not in panels of countries. We argue that the larger set of policy instruments reduces the tax price of votes at the national level, increasing the incentives to use distortionary redistributive policies to win contested elections. Moreover, constitutions reserve competencies with a high ideological potential to the national government, reducing swing voters’ responsiveness to the economic performance of the central government. We thus expect political competition to produce efficiency-oriented policies at the sub-national level compared to the national one. We test this hypothesis on a panel of 24 OECD countries over 1974-2000 and a panel of 15 Italian regions over 1984-2000 and find support for our predictions.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2411.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2411
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  1. Alberto Alesina & Guido Tabellini, 2007. "Bureaucrats or Politicians? Part II: Multiple Policy Tasks," Levine's Working Paper Archive 321307000000000875, David K. Levine.
  2. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
  3. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  4. Barro, Robert J, 1996. " Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
  5. Alberto Alesina & Guido Tabellini, 2007. "Bureaucrats or Politicians? Part I: A Single Policy Task," Levine's Working Paper Archive 321307000000000870, David K. Levine.
  6. Giavazzi, Francesco & Tabellini, Guido, 2005. "Economic and political liberalizations," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1297-1330, October.
  7. Tim Besley & Stephen Coate, . "An Economic Model of Representative Democracy," Penn CARESS Working Papers ecf70d639d700dba5327ab0c8, Penn Economics Department.
  8. Besley, Timothy & Persson, Torsten & Sturm, Daniel, 2006. "Political Competition and Economic Performance: Theory and Evidence from the United States," Discussion Papers in Economics 769, University of Munich, Department of Economics.
  9. Michele Polo, . "Electoral competition and political rents," Working Papers 144, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  10. Krusell, Per & Rios-Rull, Jose-Victor, 1996. "Vested Interests in a Positive Theory of Stagnation and Growth," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 301-29, April.
  11. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December.
  12. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
  13. repec:ner:tilbur:urn:nbn:nl:ui:12-3125517 is not listed on IDEAS
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