Centralization and Accountability: Theory and Evidence from the Clean Air Act

Giacomo Ponzetto, Federico Boffa and Amedeo Piolatto

No 9514, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies fiscal federalism when regions differ in voters? ability to monitor public officials. We develop a model of political agency in which rent-seeking politicians provide public goods to win support from heterogeneously informed voters. In equilibrium, voter information increases government accountability but displays decreasing returns. Therefore, political centralization reduces aggregate rent extraction when voter information varies across regions. It increases welfare as long as the central government is required to provide public goods uniformly across regions. The need for uniformity implies an endogenous trade off between reducing rents through centralization and matching idiosyncratic preferences through decentralization. We find that a federal structure with overlapping levels of government can be optimal only if regional differences in accountability are sufficiently large. The model predicts that less informed regions should reap greater benefits when the central government sets a uniform policy. Consistent with our theory, we present empirical evidence that less informed states enjoyed faster declines in pollution after the 1970 Clean Air Act centralized environmental policy at the federal level

Keywords: Elections; Air pollution; Imperfect information; Political centralization; Environmental policy; Government accountability; Interregional heterogeneity (search for similar items in EconPapers)
JEL-codes: D72 D82 H41 H73 H77 Q58 (search for similar items in EconPapers)
Date: 2013-06
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Should Different People Have Different Governments? (2015)
Working Paper: Centralization and accountability: Theory and evidence from the Clear Air Act (2013)
Working Paper: Centralization and Accountability: Theory and Evidence from the Clean Air Act (2012)
Working Paper: Centralization and accountability: theory and evidence from the Clean Air Act (2012)
Working Paper: Centralization and Accountability: Theory and Evidence from the Clean Air Act (2012)
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