EconPapers    
Economics at your fingertips  
 

Should Different People Have Different Governments?

Giacomo Ponzetto (), Amedeo Piolatto () and Federico Boffa
Additional contact information
Federico Boffa: Free University of Bolzano

No 1015, 2015 Meeting Papers from Society for Economic Dynamics

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.

New Economics Papers: this item is included in nep-cdm, nep-env, nep-pol and nep-ure
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://economicdynamics.org/meetpapers/2015/paper_1015.pdf (application/pdf)

Related works:
Journal Article: Political Centralization and Government Accountability (2016) Downloads
Working Paper: Should Different People Have Different Governments? (2015) Downloads
Working Paper: Should Different People Have Different Governments? (2015) Downloads
Working Paper: Political centralization and government accountability (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed015:1015

Access Statistics for this paper

More papers in 2015 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2019-11-03
Handle: RePEc:red:sed015:1015