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Political competition, tax salience and accountability. Theory and evidence from Italy

Emanuele Bracco (), Francesco Porcelli () and Michela Redoano

European Journal of Political Economy, 2019, vol. 58, issue C, 138-163

Abstract: This paper argues that electoral competition may hinder rather than foster political accountability, especially when elected officers can choose among a number of tax instruments. We develop a political agency model showing that politicians in more competitive jurisdictions use less salient tax instruments more intensely. Defining salience as visibility or, analogously, as voters' awareness of the costs associated with specific government revenue sources, we argue that voters are less likely to hold politicians to account for the associated tax burden of a less salient instrument. This in turn implies that strategic politicians will more heavily rely on less salient revenue sources when electoral competition is stronger. Using data on Italian municipal elections and taxes over a 10-year period, we determine the degree of salience of various tax instruments, including property taxes (high salience) and government fees for official documents (low salience). We then show that mayors facing stronger competition for re-election use less salient tax instruments more intensely.

Keywords: Political competition; Government; Accountability; Tax salience (search for similar items in EconPapers)
JEL-codes: H11 H2 H77 H87 D7 N12 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:poleco:v:58:y:2019:i:c:p:138-163