Fiscal federalism and redistributive politics
TL;DR: In this article, the interaction between redistributive politics at central and local levels in a federal system, and characterize the factors influencing success in redistributeive politics in both federal and unitary systems.
About: This article is published in Journal of Public Economics.The article was published on 1998-05-01. It has received 235 citations till now. The article focuses on the topics: Fiscal federalism & Unitary state.
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TL;DR: A review of comparative decentralization and federalism can be found in this article, where the authors argue that although the research addresses many of the key questions in comparative politics, it also struggles with some of the same problems and challenges as comparative politics writ large, particularly the issue of institutional endogeneity.
Abstract: ▪ Abstract Research on comparative decentralization and federalism is a booming industry. Recent research integrates insights from political science, economics, and economic history in emphasizing the importance of incentives for the operation of decentralized government. Such work has focused particular attention on fiscal, representative, and party institutions. In reviewing the past decade's research, I make two arguments. First, the comparative research on decentralization and federalism provides a model for how comparative politics can address some of the most profound questions in social thought by focusing on a theoretically and empirically tractable aspect of governance. Second, although the research addresses many of the key questions in comparative politics, it also struggles with some of the same problems and challenges as comparative politics writ large, particularly the issue of institutional endogeneity. Attention to endogeneity is central to better understanding the workings of decentralize...
100 citations
Cites background from "Fiscal federalism and redistributiv..."
...One of the key conflicts in the distributive-politics literature is whether strategic politicians will invest most of their resources in areas with many undecided swing voters (Dixit & Londregan 1998) or focus on areas where they are strong in order to motivate their base (Cox & McCubbins 1986)....
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TL;DR: In this paper, the authors test the hypothesis that intergovernmental grants allocated to co-partisans buy more political support than those allocated to local governments controlled by opposition parties and find that the grantee reaps as much political credit from inter-governmental grants as the grantor.
Abstract: In this paper we test the hypothesis that intergovernmental grants allocated to co-partisans buy more political support than grants allocated to local governments controlled by opposition parties. We use a rich Spanish database containing information about the grants received by 617 municipalities during the period 1993-2003 from two different upper-tier governments (Regional and Upper-local), as well as data of municipal voting behaviour at three electoral contests held at the different layers of government during this period. Therefore, we are able to estimate two different vote equations, analysing the effects of grants given to aligned and unaligned municipalities on the vote share of the incumbent party/parties at the regional and local elections. We account for the endogeneity of grants by instrumenting them with the average amount of grants distributed by upper-layer governments. The results suggest that grants given to co-partisans buy some political support, but that grants given to opposition parties do not bring any votes, suggesting that the grantee reaps as much political credit from intergovernmental grants as the grantor.
96 citations
Cites methods from "Fiscal federalism and redistributiv..."
...For example, adopting the line taken by the theoretical studies of Lindbeck & Weibull (1987) and Dixit & Londregan (1998), the research undertaken by Case (2001), Strömberg (2007), Johansson (2003) and Dahlberg & Johansson (2004) provides some empirical evidence to suggest that more grants are…...
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01 Mar 2012
TL;DR: In this paper, a theory of fiscal structures in political unions is presented, and the European Union and its economic geography under centrifugal representation are discussed. But the road ahead is not discussed.
Abstract: 1. Regions and redistribution: introduction and overview 2. A theory of fiscal structures in political unions 3. The road ahead: the empirical strategy 4. The European Union: economic geography and fiscal structures under centrifugal representation 5. North America's divide: distributive tensions, risk sharing, and the centralization of public insurance in federations 6. Germany's reunification: distributive tensions and fiscal structures under centripetal representation 7. Endogenous decentralization and welfare resilience: Spain, 1978-2007 8. The political geography of inequality: summary and implications.
93 citations
TL;DR: In this paper, the authors apply the traditional literature on partisan politics and national redistribution to the case of the EU and show that the traditional left vs. right cleavage can have an impact on the size of regional transfers.
Abstract: The current debate on the role of regional politics in the Euro pean Union (EU) is dominated by approaches that focus upon either intergovernmental bargaining or multi-level govern ance. Because Structural Funds are the main EU-wide redis tributive policy, we propose to apply the traditional literature on partisan politics and national redistribution to the case of the EU. We use a new data set on both the distribution of Structural Funds across regions and the distribution of vote shares for different factions of the European Parliament. These data provide empirical details for some of the partisan competition that takes place at the regional level. Specifically, we show that the traditional left vs. right cleavage can have an impact on the size of regional transfers.
89 citations
Cites background from "Fiscal federalism and redistributiv..."
...The addition of a cleavage between different political layers makes theoretical predictions fairly difficult (e.g. Dixit and Londregan, 1998; Persson, 2002)....
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TL;DR: In this article, a simple political agency model is proposed to explain the effect of political alignment between different tiers of government on intergovernmental grants and election outcomes, and the model is tested using a regression discontinuity design on a new data-set on Italian municipalities.
88 citations
References
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TL;DR: The authors show that the Musgrave-Samuelson analysis, which is valid for federal expenditures, need not apply to local expenditures, and restate the assumptions made by Musgrave and Samuelson and the central problems with which they deal.
Abstract: NE of the most important recent developments in the area of "applied economic theory" has been the work of Musgrave and Samuelson in public finance theory.2 The two writers agree on what is probably the major point under investigation, namely, that no "market type" solution exists to determine the level of expenditures on public goods. Seemingly, we are faced with the problem of having a rather large portion of our national income allocated in a "non-optimal" way when compared with the private sector. This discussion will show that the Musgrave-Samuelson analysis, which is valid for federal expenditures, need not apply to local expenditures. The plan of the discussion is first to restate the assumptions made by Musgrave and Samuelson and the central problems with which they deal. After looking at a key difference between the federal versus local cases, I shall present a simple model. This model yields a solution for the level of expenditures for local public goods which reflects the preferences of the population more adequately than they can be reflected at the national level. The assumptions of the model will then be relaxed to see what implications are involved. Finally, policy considerations will be discussed.
12,105 citations
TL;DR: The use of spatial ideas to interpret party competition is a universal phenomenon of modern politics as discussed by the authors, and most spatial interpretations of party competition have a very poor fit with the evidence about how large-scale electorates and political leaders actually respond to politics.
Abstract: The use of spatial ideas to interpret party competition is a universal phenomenon of modern politics. Such ideas are the common coin of political journalists and have extraordinary influence in the thought of political activists. Especially widespread is the conception of a liberal-conservative dimension on which parties maneuver for the support of a public that is itself distributed from left to right. This conception goes back at least to French revolutionary times and has recently gained new interest for an academic audience through its ingenious formalization by Downs and others. However, most spatial interpretations of party competition have a very poor fit with the evidence about how large-scale electorates and political leaders actually respond to politics. Indeed, the findings on this point are clear enough so that spatial ideas about party competition ought to be modified by empirical observation. I will review here evidence that the “space” in which American parties contend for electoral support is very unlike a single ideological dimension, and I will offer some suggestions toward revision of the prevailing spatial model.
1,501 citations
TL;DR: In this article, balanced budget redistribution between socioeconomic groups is modeled as the outcome of electoral competition between two political parties, and a sufficient condition for existence is given, requiring that there be enough heterogeneity with respect to party preferences in the electorate.
Abstract: This paper models balanced-budget redistribution between socio-economic groups as the outcome of electoral competition between two political parties. Equilibrium is unique in the present model, and a sufficient condition for existence is given, requiring that there be enough ‘stochastic heterogeneity’ with respect to party preferences in the electorate. The validity of Hotelling's ‘principle of minimum differentiation’, and of ‘Director's Law’, are examined under alternative hypotheses concerning administrative costs of redistributions, and voter's possibilities both of abstaining from voting and of becoming campaign activists for one of the parties. The policy strategy of expected-plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality. Incomes are fixed and known, so lump-sum taxation is feasible. However, constraints on tax/transfer differentiation between individuals are permitted in the analysis.
1,486 citations
TL;DR: In this paper, the authors examine what determines whether an interest group will receive favors in pork-barrel politics, using a model of majority voting with two competing parties, where each group's membership is heterogeneous in its ideological affinity for the parties.
Abstract: We examine what determines whether an interest group will receive favors in pork-barrel politics, using a model of majority voting with two competing parties. Each group's membership is heterogeneous in its ideological affinity for the parties. Individuals face a trade-off between party affinity and their own transfer receipts. The model is general enough to yield two often-discussed but competing theories as special cases. If the parties are equally effective in delivering transfers to any group, then the outcome of the process conforms to the "swing voter" theory: both parties woo the groups that are politically central, and most willing to switch their votes in response to economic favors. If groups have party affinities, and each party is more effective in delivering favors to its own support group, then we can get the "machine politics" outcome, where each party favors its core support group. We derive these results theoretically, and illustrate their operation in particular examples.
1,301 citations
TL;DR: In this paper, the authors argue that the optimal strategy for risk-averse candidates will be to promise redistributions first and foremost to their reelection constituency and thereby to maintain existing political coalitions.
Abstract: Spatial models of electoral competition typically simplify the analysis by ignoring the question of internal constituency politics: constituencies are modeled simply as a distribution of ideal points along a set of issue dimensions. Matters related to the stability of divergent electoral coalitions have rarely been addressed. We explicitly take into account how differential rates of support by various groups in a constituency will influence candidates' campaign promises and the likelihood that stable electoral coalitions will be forged. Viewing campaign platforms as promised redistributions of welfare, we argue that the optimal strategy for risk-averse candidates will be to promise redistributions first and foremost to their reelection constituency and thereby to maintain existing political coalitions. We use evidence from the urban services literature to support our propositions.
1,117 citations