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Electoral Competition as a Determinant of Fiscal Decentralization

  • Mario Jametti

    ()

    (Institute for Microeconomics and Public Economics (MecoP), University of Lugano; CESifo)

  • Marcelin Joanis

    ()

    (University of Sherbrooke, GREDI, CIRANO)

Fiscal decentralization is high on the agenda in policy fora. This paper empirically investigates the underlying causes of fiscal decentralization, based on the predictions of a simple political economy model. We argue that the likeliness that a central government engages in devolution of powers depends in important ways on the political forces that it faces, the theory’s main insight being that the central government’s electoral strength should, all else being equal, decrease that government’s share of spending. Consistent with the model’s predictions, empirical results from a panel of democracies support the relevance of political factors as determinants of fiscal decentralization. The relationship between central government electoral strength and both expenditure and revenue centralization emerges as negative and non-linear.

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File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-1111.pdf
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Paper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number 11-11.

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Length: 27 pages
Date of creation: 26 Aug 2011
Date of revision:
Handle: RePEc:shr:wpaper:11-11
Contact details of provider: Postal: Sherbrooke, Québec, J1K 2R1
Phone: (819) 821-7233
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Web page: http://www.gredi.org/home/documents-de-travail
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  1. Mario Jametti & Marius Brülhart, 2007. "Does Tax Competition Tame the Leviathan?," Working Papers 2007_7, York University, Department of Economics.
  2. Marcelin Joanis, 2008. "The Road to Power: Partisan Loyalty and the Centralized Provision of Local Infrastructure," Cahiers de recherche 08-15, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  3. Lars P. Feld & Gebhard Kirchgässner & Christoph A. Schaltegger, 2003. "Decentralized Taxation and the Size of Government: Evidence from Swiss State and Local Governments," CESifo Working Paper Series 1087, CESifo Group Munich.
  4. Olivier Cadot & Lars-Hendrik Röller & Andreas Stephan, 2002. "Contribution to Productivity or Pork Barrel? The Two Faces of Infrastructure Investment," CIG Working Papers FS IV 02-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  5. Brian Knight, 2003. "Parochial Interests and the Centralized Provision of Local Public Goods: Evidence from Congressional Voting on Transportation Projects," NBER Working Papers 9748, National Bureau of Economic Research, Inc.
  6. Ruben Enikolopov & Ekaterina Zhuravskaya, 2006. "Decentralization and Political Institutions," Working Papers w0065, Center for Economic and Financial Research (CEFIR).
  7. Arzaghi, Mohammad & Henderson, J. Vernon, 2005. "Why countries are fiscally decentralizing," Journal of Public Economics, Elsevier, vol. 89(7), pages 1157-1189, July.
  8. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
  9. Marcelin Joanis, 2008. "Intertwined Federalism: Accountability Problems under Partial Decentralization," Cahiers de recherche 08-22, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  10. Désirée Teobaldelli, 2011. "Federalism and the shadow economy," Public Choice, Springer, vol. 146(3), pages 269-289, March.
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