Decentralization and Electoral Accountability: Incentives, Separation, and Voter Welfare

By Jean Hindriks, Ben Lockwood. Social Science Research Network, 2009

195 citations recorded by the source corpus.

This paper studies the relationship between fiscal decentralization and electoral accountability, by analyzing how decentralization impacts upon incentive and selection effects, and thus on voter welfare. The model abstracts from features such as public good spillovers or economies of scale, so that absent elections, voters are indifferent about the fiscal regime. The effect of fiscal centralization on voter welfare works through two channels: (i) via its effect on the probability of pooling by the bad incumbent; (ii) conditional on the probability of pooling, the extent to which, with centralization, the incumbent can divert rents in some regions without this being detected by voters in other regions (selective rent diversion). Both these effects depend on the information structure; whether voters only observe fiscal policy in their own region, in all regions, or an intermediate case with a uniform tax across all regions. More voter information does not necessarily raise voter welfare, and under some conditions, voter would choose uniform over di®erentiated taxes ex ante to constrain selective rent diversion.

Subfields: Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/88f14f6a87511aa637f1f6cd57e15a070ef96cb5

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Citations in the corpus

Fiscal decentralization and public sector efficiency: evidence from OECD countries (2013, background): “voted out of office, thus positively affecting the overall government efficiency (Hindriks and Lockwood, 2009).”
Decentralization and Local Governments' Performance: How Does Fiscal Autonomy Affect Spending Efficiency? (2012, background): “…in public spending efficiency and voter welfare suggested by modern theoretical literature on fiscal federalism highlights the importance of electoral accountability of incumbent politicians, obtainable by increasing the degree of fiscal autonomy (e.g., Hindriks and Lockwood, 2009; Weingast, 2009).”
Decentralization and the Productive Efficiency of Government: Evidence from Swiss Cantons (2007, background): “Hindriks and Lockwood (2005) extend this argument to show how decentralization may increase the equilibrium probability that corrupt incumbents are voted out of o¢ ce (a stronger selection e¤ect in the terminology of Besley and Smart, 2004).”
Public sector efficiency: leveling the playing field between OECD countries (2008, unknown): “This result can be attributed either to (i) increased electoral control that comes as a result of fiscal decentralization (see e.g., Hindriks and Lockwood 2005; Seabright 1996 )o r to (ii) the yardstick competition argument (see e.g., Besley and Case 1995).”