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

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  • Fabio Padovano
  • Roberto Ricciuti

Abstract

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.

Suggested Citation

  • Fabio Padovano & Roberto Ricciuti, 2008. "The Political Competition-Economic Performance Puzzle: Evidence from the OECD Countries and the Italian Regions," CESifo Working Paper Series 2411, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_2411
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    References listed on IDEAS

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    1. 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 222-279, April.
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    3. Michele Polo, "undated". "Electoral competition and political rents," Working Papers 144, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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    6. Besley, Timothy J. & Persson, Torsten & Sturm, Daniel M, 2005. "Political Competition and Economic Performance: Theory and Evidence from the United States," CEPR Discussion Papers 5138, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Dash, Bharatee Bhushan & Mukherjee, Sacchidananda, 2013. "Does Political Competition Influence Human Development? Evidence from the Indian States," Working Papers 13/118, National Institute of Public Finance and Policy.
    2. Fabio Padovano, 2013. "Are we witnessing a paradigm shift in the analysis of political competition?," Public Choice, Springer, vol. 156(3), pages 631-651, September.
    3. Yuriy O. Gaivoronskiy, 2015. "The Influence of Political Competition on the Efficiency of the Regional Executives in Russia," HSE Working papers WP BRP 28/PS/2015, National Research University Higher School of Economics.

    More about this item

    Keywords

    political competition; growth; redistribution; national and regional government;

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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