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Centralization and accountability: theory and evidence from the Clean Air Act

Listed author(s):
  • Federico Boffa

    ()

    (Università di Macerata & IEB)

  • Amedeo Piolatto

    ()

    (Universitat de Barcelona & IEB)

  • Giacomo A. M. Ponzetto

    ()

    (CREI, Universitat Pompeu Fabra & Barcelona GSE)

This paper studies fiscal federalism when voter information varies across regions. We develop a model of political agency with heterogeneously informed voters. Rent-seeking politicians provide public goods to win the votes of the informed. As a result, rent extraction is lower in regions with higher information. In equilibrium, electoral discipline has decreasing returns. Thus, political centralization efficiently reduces aggregate rent extraction. The model predicts that a region’s benefits from centralization are decreasing in its residents’ information. We test this prediction using panel data on pollutant emissions across U.S. states. The 1970 Clean Air Act centralized environmental policy at the federal level. In line with our theory, we find that centralization induced a differential decrease in pollution for uninformed relative to informed states.

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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2012/14.

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Length: 46 pages
Date of creation: 2012
Handle: RePEc:ieb:wpaper:2012/5/doc2012-14
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