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

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  • Hindriks, Jean
  • Lockwood, Ben
Abstract
This paper studies the relationship between ¯scal decentralization and electoral accountability, by analyzing how decentralization impacts upon incentive and selection e®ects, 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 indi®erent about the ¯scal regime. The e®ect of ¯scal centralization on voter welfare works through two channels: (i) via its e®ect 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 e®ects depend on the information structure; whether voters only observe ¯scal 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.

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  • Hindriks, Jean & Lockwood, Ben, 2005. "Decentralization and Electoral Accountability: Incentives, Separation, and Voter Welfare," Economic Research Papers 269623, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269623
    DOI: 10.22004/ag.econ.269623
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    More about this item

    Keywords

    Financial Economics; Political Economy;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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