Intergovernmental transfers and re-election concerned politicians

Abstract

This paper studies intergovernmental transfers. Many intergovernmental transfers are said to serve political purposes. We augment a standard model of political career concerns to allow for multilevel governance. When elections are simultaneous, there is no equilibrium with non-zero transfers as the opportunity cost of a transfer is too high. However when elections are staggered, an equilibrium exists with positive transfers. These transfers are motivated by two factors; sabotaging challengers and rent smoothing. These transfers are non-partisan and an artifact of the electoral dynamics as prescribed by an electoral calendar and politicians' career concerns. This model produces an additional insight in understanding intergovernmental grants. These results are discussed with reference to the growing literature on the partisan basis of intergovernmental transfers.

Subnational borrowing and bailouts: When the federal government looks at the votes (differently) and its borrowing matters

“…For instance, Kaiser and Taugourdeau (2013) show the relevance of whether the elections are staggered or not in terms of making gains in fiscal discipline at subnational level. Hickey (2015) extends this view by including the lame duck scenario at the local level; the federal incumbent might find it beneficial to help local politicians seeking reelection, beyond their own direct reelection as federal government. Robinson and Torvik (2009) even relate the probability of political survival for federal politicians with their ability to keep soft‐budget constraints at SNGs, financing projects known to be bad.…”

“…Other papers have stressed the crucial role played by the timing of elections and term limits. Some examples can be found in Robinson and Torvik (2009), Kaiser and Taugourdeau (2013), Hickey (2015), and Daniele et al (2020). More recently, Fiorillo and Merkaj (2020) provide an eclectic approach to the main factors guiding the allocation of intergovernmental grants for electoral purposes.…”

The impressive contribution of Canadian economists to fiscal federalism theory and policy

“…Redoano and Scharf (2004) show that delegating policy coordination decisions to an elected representative can act as a commitment device and is more likely to result in policy centralization than under direct democracy. Further, political institutions in which centralized policy decisions are taken can also affect the formation of federations (Hickey 2013).…”

“…Underpinning this view is the idea that unconstrained politicians will act in their own self-interest and not make decisions in their constituents' interest. Hickey (2015) highlights the strategic role of intergovernmental transfers when federal politicians facing term limits are concerned with being re-elected. Imperfect information between voters and politicians can worsen government accountability and strengthen the argument for decentralization.…”

The effects of inter-municipal cooperation and central grant allocation on the size of the French local public sector

“…Other contributions focus on the eects of electoral competition margin of victory, fragmentation, popularityon policy outcomes (see Solé-Ollé (2006), Aidt et al (2011) and Boukari (2019)). Third, the partisan alignment through intergovernmental transfers has received increasing attention and is found in dierent countries (Kantorowicz (2017), Solé-Ollé and Sorribas-Navarro (2008), Padovano (2012), Brollo and Nannicini (2012), Bracco et al (2015), Farvaque et al (2019), Albouy (2013) and Hickey (2015)).…”