Political Competition and Economic Performance: Theory and Evidence from the United States

Besley, Timothy; Persson, Torsten; Sturm, Daniel

doi:10.3386/w11484

“…5 2 This result is consistent with earlier work analysing the relationship between political competition and policy outcomes. For example, recent work by Besley and Case (2003) and Besley et al (2005) …nd that increased political competition leads to lower taxes. However, according to our de…nition, municipalities with a weak majority include unde…ned party coalitions, where neither the left-nor the right-wing bloc is in power, which is typically the case when there are strong local parties.…”

Section: Testing For Yardstick Competition E¤ectsmentioning

confidence: 99%

Identifying strategic interactions in Swedish local income tax policies

Edmark

¹

,

Ågren

²

2008

Journal of Urban Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in October, 2006Abstract This paper uses data on Swedish local governments to test for strategic interaction in tax setting. We make no a priori assumptions regarding the underlying behaviour of individuals, but instead attempt to test for the presence and type of underlying spatial process. First, we employ the estimation methods used in most earlier studies, however, we stress that these methods are limited in identifying the source of interaction. Hence, we make use of a number of additional, indirect predictions from the theories of tax competition and yardstick competition, in order to test for the presence of strategic interaction. Using such additional predictions of the theories serves a twofold purpose -…rst it helps us establish if the spatial coe¢ cient is due to strategic interactions or merely re ‡ecting spatial error correlation, and second, it helps identify the source of interaction. The analysis provides strong evidence for spatial dependence in tax rates among Swedish local governments. Moreover, we …nd weak evidence of tax competition or yardstick competition e¤ects in the setting of tax rates.

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“…8 It is expected, that high political concentration points to low political competition and thus should reduce efficiency (see e.g. Besley, Persson and Sturm, 2005). As a measure of political preferences, the share of seats of the left-wing parties (i.e.…”

Section: Datamentioning

confidence: 99%

The Impact of Intergovernmental Grants on Cost Efficiency: Theory and Evidence from German Municipalities

Kalb

¹

2010

Economic Analysis and Policy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Terms of use: Documents in EconStor mayDownload this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp08051.pdf Non-Technical SummaryA key issue in the theoretical and empirical literature of public finance is how intergovernmental grants influence the level of local public spending of the recipient government.Researchers have been particularly interested in whether grants from the federal government stimulate higher levels of overall spending by local governments or rather substitute for local tax revenue. The first effect is called the 'flypaper effect' following Arthur Okun's observation that 'money sticks where it hits'. In contrast, an aspect which has attracted far less attention in the flypaper literature is concerned with the question whether observed changes in expenditures are associated with analogous changes in the actual level of public goods or services or whether increases in expenditures lead (at least to some extent) to a waste of resources (or X-inefficiency) and losses in productive efficiency.Given this background the aim of this paper is to add to the existing literature by studying the causal effects of intergovernmental grants on local technical efficiency in Germany. For this purpose we use a simple bureaucracy model and introduce the possibility that the federal government is able to give (lump sum) grants to the local government as a substitute for local tax revenues. Moreover, we assume that the citizens of the local jurisdiction are susceptible to a misperception of the true tax price of the local public goods or services due to fiscal illusion. In fact, it is assumed that a higher amount of intergovernmental grants leads to an underestimation of the true tax price by the citizens and therefore to a higher demand of public output. Using this framework we analyse how a higher degree of redistribution, that is an increase in the amount of grants to the local government, affects the technical efficiency in the provision of public goods and services in this local jurisdiction. We find that a higher degree of redistribution has a negative impact on the technical efficiency in the local jurisdiction.Finally...

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“…In most theoretical models, this is modeled as rents that accrue to the politician or the political party in power (see transfers and slack and inefficiencies in policy making (Besley et al, 2007, Besley and Case, 2003and Svaleryd and Vlachos, 2007. Another way to further one's own interest is to make policy choices according to one's own preferences.…”

Section: Political Competition and The Impact Of Women's Representationmentioning

confidence: 99%

“…Empirical literature has found that strong political competition seems to keep politicians in power from furthering their own interests, rather than the interests of the general public (see e.g. Kalt and Zupan, 1984, 1990, Besley et al, 2007, Besley and Case, 2003and Svaleryd and Vlachos, 2007. This paper also provides evidence suggesting that political competition limits elected representatives from pursuing their own interest by showing that the effect of women's representation is smaller when political competition is strong.…”

Section: Introductionmentioning

confidence: 99%

Women's representation and public spending

Svaleryd

¹

2009

European Journal of Political Economy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Women's Representation and Public SpendingHelena Svaleryd

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Political Competition and Economic Performance: Theory and Evidence from the United States

Cited by 86 publications

References 12 publications

Identifying strategic interactions in Swedish local income tax policies

Identifying strategic interactions in Swedish local income tax policies

The Impact of Intergovernmental Grants on Cost Efficiency: Theory and Evidence from German Municipalities

Women's representation and public spending

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