Federal against Local Governments: Political Accountability under Asymmetric Information

Fausto Hernández-Trillo (), Juan Torres Rojo () and César L. Guerrero Luchtenberg
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Fausto Hernández-Trillo: Division of Economics, CIDE

No DTE 381, Working Papers from CIDE, División de Economía

Abstract: We model a situation in which the voters are or not fooled by the local or/and the federal government, and their capability of accounting the behavior of the governments, when they are not fully informed about which are services/goods that each level have to provide, and hence they are not able to know which of the levels have failed, the federal or the local, if only one has failed. Also, we do not assume that the voters know the type of the parties, bad or good---willing to divert resources or not, roughly. We propose two mechanisms, one in which the voters have information about the competencies, the other when not. Expectably, in the first situation from the mechanism it is possible to infer the types of all the parties, but in the second only in rare situations it reveals the types of all the parties. However, if there are good parties in both levels of governance, the second mechanism select two good parties. That is, there is accountability, although not that perfect as it is possible in the first situation. In the other situations, that is, if in only one level there are good parties, or in both levels all the parties are of bad type, the mechanism predicts the obvious result: Or it will be only one good party in o¢ ce, not knowing which one is good and which one is bad, or it will be only bad parties in office. Strikingly enough, in some situations, the voters may also learn, through the mechanism, the competencies.

Keywords: Federal; Local Governments; Political Accountability; Asymmetric Information (search for similar items in EconPapers)
JEL-codes: D82 H7 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2006-12
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