The Political Competition-Economic Performance Puzzle: Evidence from the OECD Countries and the Italian Regions

Fabio Padovano and Roberto Ricciuti

No 2411, CESifo Working Paper Series from CESifo

Abstract: Empirical tests of the theories on the relationship between political competition and economic performance generate a puzzle: data tend to support the theory at the lower levels of government, but not in panels of countries. We argue that the larger set of policy instruments reduces the tax price of votes at the national level, increasing the incentives to use distortionary redistributive policies to win contested elections. Moreover, constitutions reserve competencies with a high ideological potential to the national government, reducing swing voters’ responsiveness to the economic performance of the central government. We thus expect political competition to produce efficiency-oriented policies at the sub-national level compared to the national one. We test this hypothesis on a panel of 24 OECD countries over 1974-2000 and a panel of 15 Italian regions over 1984-2000 and find support for our predictions.

Keywords: political competition; growth; redistribution; national and regional government (search for similar items in EconPapers)
JEL-codes: D78 H71 H72 O17 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (5)

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