Decentralization, Vertical Fiscal Imbalance, and Political Selection

74 Pages Posted: 13 Nov 2013

See all articles by Massimo Bordignon

Massimo Bordignon

Universita Cattolica; CESifo (Center for Economic Studies and Ifo Institute)

Matteo Gamalerio

University of Barcelona - Institut d'Economia de Barcelona (IEB)

Gilberto Turati

Catholic University of the Sacred Heart, Rome

Date Written: October 31, 2013

Abstract

In a career-concern model of politics with endogenous candidacy and different types of politicians, following a decentralization reform, politicians with different skills are elected in municipalities characterized by different levels of autonomous resources. As an effect, consumer welfare increases only, or mainly, in richer municipalities. We test these predictions by exploiting the differentiated reduction in Vertical Fiscal Imbalance in Italian municipalities, due to the strong difference in the tax base, following the decentralization reforms of the ’90s. Results strongly support our predictions and are robust to several alternative stories.

Keywords: decentralization, vertical fiscal imbalance, quality of politicians

JEL Classification: D720, D780

Suggested Citation

Bordignon, Massimo and Gamalerio, Matteo and Turati, Gilberto, Decentralization, Vertical Fiscal Imbalance, and Political Selection (October 31, 2013). CESifo Working Paper Series No. 4459, Available at SSRN: https://ssrn.com/abstract=2353334 or http://dx.doi.org/10.2139/ssrn.2353334

Massimo Bordignon (Contact Author)

Universita Cattolica ( email )

20123 Milano
Italy
+39-2-5836-3300/1 (Phone)
+39-2-5836-3302 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Matteo Gamalerio

University of Barcelona - Institut d'Economia de Barcelona (IEB) ( email )

c/ Tinent Coronel Valenzuela, 1-11
Barcelona, 08034
Spain

Gilberto Turati

Catholic University of the Sacred Heart, Rome ( email )

Largo F. Vito, 1
Rome, 00168
Italy

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