IDEAS home Printed from https://ideas.repec.org/a/kap/copoec/v23y2012i4p302-336.html
   My bibliography  Save this article

Sub-national political regimes and asymmetric fiscal decentralization

Author

Listed:
  • Alexander Libman

Abstract

This paper develops a model to explain how sub-national political regimes affect the variation in retention rates in a country in which a region and a central government bilaterally bargain over the distribution of tax revenue given a particular tax rate (and thus fiscal decentralization is asymmetric). This study examines cases in which both sub-national and national governments have the same political regime (democracies and non-democracies) and situations in which the central and regional political regimes differ. This article shows that in the latter case, regions receive a smaller share of tax revenue for a broad set of parameters of the model (as opposed to the case of a pure non-democracy); in the case of identical political regimes, the comparative fiscal decentralization is determined by the productivity-enhancing effect of regional public goods. Copyright Springer Science + Business Media, LLC 2012

Suggested Citation

  • Alexander Libman, 2012. "Sub-national political regimes and asymmetric fiscal decentralization," Constitutional Political Economy, Springer, vol. 23(4), pages 302-336, December.
    • Handle: RePEc:kap:copoec:v:23:y:2012:i:4:p:302-336
    DOI: 10.1007/s10602-012-9126-3
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10602-012-9126-3
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10602-012-9126-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Martin C. McGuire & Mancur Olson, 1998. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," International Economic Association Series, in: Silvio Borner & Martin Paldam (ed.), The Political Dimension of Economic Growth, chapter 3, pages 38-73, Palgrave Macmillan.
    2. Brueckner, Jan K., 2009. "Partial fiscal decentralization," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 23-32, January.
    3. Lorenz Blume & Stefan Voigt, 2011. "Federalism and decentralization—a critical survey of frequently used indicators," Constitutional Political Economy, Springer, vol. 22(3), pages 238-264, September.
    4. Polterovich, Victor & Popov, Vladimir, 2007. "Democratization, Quality of Institutions and Economic Growth," MPRA Paper 19152, University Library of Munich, Germany.
    5. Bearse, P. & Glomm, G. & Janeba, E., 2000. "Why poor countries rely mostly on redistribution in-kind," Journal of Public Economics, Elsevier, vol. 75(3), pages 463-481, March.
    6. Timothy Besley & Robin Burgess, 2002. "The Political Economy of Government Responsiveness: Theory and Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1415-1451.
    7. Wintrobe,Ronald, 2000. "The Political Economy of Dictatorship," Cambridge Books, Cambridge University Press, number 9780521794497, January.
    8. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(4), pages 755-776.
    9. Libman Alexander & Feld Lars P., 2013. "Strategic Tax Collection and Fiscal Decentralization: The Case of Russia," German Economic Review, De Gruyter, vol. 14(4), pages 449-482, December.
    10. Richard M. Bird & Robert D. Ebel (ed.), 2007. "Fiscal Fragmentation in Decentralized Countries," Books, Edward Elgar Publishing, number 3864, March.
    11. Georgy Egorov & Konstantin Sonin, 2011. "Dictators And Their Viziers: Endogenizing The Loyalty–Competence Trade‐Off," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 903-930, October.
    12. Goyal, Sanjeev & Staal, Klaas, 2004. "The political economy of regionalism," European Economic Review, Elsevier, vol. 48(3), pages 563-593, June.
    13. Laurent Flochel & Thierry Madies, 2002. "Interjurisdictional tax competition in a federal system of overlapping revenue maximizing governments," Post-Print hal-02878035, HAL.
    14. Barry R. Weingast, 2005. "The Performance and Stability of Federalism: An Institutional Perspective," Springer Books, in: Claude Menard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 7, pages 149-172, Springer.
    15. Vincent Anesi & Philippe De Donder, 2011. "Voting under the threat of secession: accommodation vs. repression," Working Papers 2011/40, Institut d'Economia de Barcelona (IEB).
    16. Olivier Blanchard & Andrei Shleifer, 2001. "Federalism With and Without Political Centralization: China Versus Russia," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 1-8.
    17. Myerson, Roger B., 2006. "Federalism and Incentives for Success of Democracy," Quarterly Journal of Political Science, now publishers, vol. 1(1), pages 3-23, January.
    18. Jenna Bednar, 2007. "Valuing Exit Options," Publius: The Journal of Federalism, CSF Associates Inc., vol. 37(2), pages 190-208, Spring.
    19. Patrick Bolton & Gérard Roland, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1057-1090.
    20. Haimanko, Ori & Le Breton, Michel & Weber, Shlomo, 2005. "Transfers in a polarized country: bridging the gap between efficiency and stability," Journal of Public Economics, Elsevier, vol. 89(7), pages 1277-1303, July.
    21. Arzaghi, Mohammad & Henderson, J. Vernon, 2005. "Why countries are fiscally decentralizing," Journal of Public Economics, Elsevier, vol. 89(7), pages 1157-1189, July.
    22. Rui J. P. de Figueiredo & Michael McFaul & Barry R. Weingast, 2007. "Constructing Self-Enforcing Federalism in the Early United States and Modern Russia," Publius: The Journal of Federalism, CSF Associates Inc., vol. 37(2), pages 160-189, Spring.
    23. Besley, Timothy & Persson, Torsten & Sturm, Daniel, 2010. "Political competition, policy and growth: theory and evidence from the United States," LSE Research Online Documents on Economics 121718, London School of Economics and Political Science, LSE Library.
    24. Robert P. Inman & Daniel L. Rubinfeld, 2008. "Federal Institutions and the Democratic Transition: Learning from South Africa," NBER Working Papers 13733, National Bureau of Economic Research, Inc.
    25. Gradstein, Mark, 2004. "Political Bargaining in a Federation: Buchanan meets Coase," CEPR Discussion Papers 4188, C.E.P.R. Discussion Papers.
    26. Ben D. MacArthur & Richard O. C. Oreffo, 2005. "Bridging the gap," Nature, Nature, vol. 433(7021), pages 19-19, January.
    27. Michel Le Breton & Shlomo Weber, 2003. "The Art of Making Everybody Happy: How to Prevent a Secession," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 1-4.
    28. Gradstein, Mark, 2004. "Political bargaining in a federation: Buchanan meets Coase," European Economic Review, Elsevier, vol. 48(5), pages 983-999, October.
    29. Laurent Flochel & Thierry Madies, 2002. "Interjurisdictional Tax Competition in a Federal System of Overlapping Revenue Maximizing Governments," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(2), pages 121-141, March.
    30. Baretti, Christian & Huber, Bernd & Lichtblau, Karl, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," Munich Reprints in Economics 20129, University of Munich, Department of Economics.
    31. Jorge Martinez-Vazquez, 2007. "Asymmetric Federalism in Russia: Cure or Poison?," Chapters, in: Richard M. Bird & Robert D. Ebel (ed.), Fiscal Fragmentation in Decentralized Countries, chapter 8, Edward Elgar Publishing.
    32. Bordignon, Massimo & Brusco, Sandro, 2001. "Optimal secession rules," European Economic Review, Elsevier, vol. 45(10), pages 1811-1834, December.
    33. Buchanan, James M & Faith, Roger L, 1987. "Secession and the Limits of Taxation: Toward a Theory of Internal Exit," American Economic Review, American Economic Association, vol. 77(5), pages 1023-1031, December.
    34. Robert Deacon, 2009. "Public good provision under dictatorship and democracy," Public Choice, Springer, vol. 139(1), pages 241-262, April.
    35. Wintrobe, Ronald, 1990. "The Tinpot and the Totalitarian: An Economic Theory of Dictatorship," American Political Science Review, Cambridge University Press, vol. 84(3), pages 849-872, September.
    36. B. Peter Rosendorff, 2001. "Choosing Democracy," Economics and Politics, Wiley Blackwell, vol. 13(1), pages 1-29, March.
    37. Claude Menard & Mary M. Shirley (ed.), 2005. "Handbook of New Institutional Economics," Springer Books, Springer, number 978-0-387-25092-2, March.
    38. Wallace E. Oates & Wallace E. Oates, 2004. "An Essay on Fiscal Federalism," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 22, pages 384-414, Edward Elgar Publishing.
    39. Klaus E. Meyer & Hung Vo Nguyen, 2005. "Foreign Investment Strategies and Sub‐national Institutions in Emerging Markets: Evidence from Vietnam," Journal of Management Studies, Wiley Blackwell, vol. 42(1), pages 63-93, January.
    40. Jorge Martinez-Vazquez & Andrey Timofeev, 2009. "Decentralization Measures Revisited," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0913, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    41. Christian Baretti & Bernd Huber & Karl Lichtblau, 2002. "A Tax on Tax Revenue: The Incentive Effects of Equalizing Transfers: Evidence from Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(6), pages 631-649, November.
    42. Richard M. Bird, 2003. "Asymmetric Fiscal Decentralization: Glue or Solvent?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0309, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    43. Persson, Torsten & Roland, Gerard & Tabellini, Guido, 1998. "Towards micropolitical foundations of public finance," European Economic Review, Elsevier, vol. 42(3-5), pages 685-694, May.
    44. Celina Souza, 1996. "Redemocratization and Decentralization in Brazil: The Strength of the Member States," Development and Change, International Institute of Social Studies, vol. 27(3), pages 529-555, July.
    45. Alderman, Harold, 2002. "Do local officials know something we don't? Decentralization of targeted transfers in Albania," Journal of Public Economics, Elsevier, vol. 83(3), pages 375-404, March.
    46. Libman, Alexander, 2010. "Constitutions, regulations, and taxes: Contradictions of different aspects of decentralization," Journal of Comparative Economics, Elsevier, vol. 38(4), pages 395-418, December.
    47. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
    48. Jennifer Gandhi & Adam Przeworski, 2006. "Cooperation, Cooptation, And Rebellion Under Dictatorships," Economics and Politics, Wiley Blackwell, vol. 18(1), pages 1-26, March.
    49. Weingast, Barry R., 2009. "Second generation fiscal federalism: The implications of fiscal incentives," Journal of Urban Economics, Elsevier, vol. 65(3), pages 279-293, May.
    50. Olson, Mancur, 1993. "Dictatorship, Democracy, and Development," American Political Science Review, Cambridge University Press, vol. 87(3), pages 567-576, September.
    51. Alexander Libman & Lars P. Feld, 2013. "Strategic Tax Collection and Fiscal Decentralization: The Case of Russia," German Economic Review, Verein für Socialpolitik, vol. 14(4), pages 449-482, November.
    52. Alexander Libman, 2012. "Democracy, size of bureaucracy, and economic growth: evidence from Russian regions," Empirical Economics, Springer, vol. 43(3), pages 1321-1352, December.
    53. Roger Congleton & Andreas Kyriacou & Jordi Bacaria, 2003. "A Theory of Menu Federalism: Decentralization by Political Agreement," Constitutional Political Economy, Springer, vol. 14(3), pages 167-190, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Libman, Alexander, 2013. "Resource Curse, Institutions and Non-Resource Sector," MPRA Paper 53563, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах [ENDOGENOUS BOUNDARIES AND DISTRIBUTION OF POWER In the Federation]," MPRA Paper 16473, University Library of Munich, Germany.
    2. Alexander Libman, 2015. "Words or deeds: what matters? On the role of symbolic action in political decentralization," Empirical Economics, Springer, vol. 49(3), pages 801-838, November.
    3. Joan Esteban & Sabine Flamand & Massimo Morelli & Dominic Rohner, 2018. "A Dynamic Theory of Secession," CESifo Working Paper Series 7257, CESifo.
    4. Flamand, Sabine, 2019. "Partial decentralization as a way to prevent secessionist conflict," European Journal of Political Economy, Elsevier, vol. 59(C), pages 159-178.
    5. Sabine Flamand & Massimo Morelli & Dominic Rohner & Joan-Maria Esteban, 2018. "The Survival and Demise of the State: A Dynamic Theory of Secession," Working Papers 1028, Barcelona School of Economics.
    6. Joan Esteban & Sabine Flamand & Massimo Morelli & Dominic Rohner, 2017. "Stay, Split or Strike: Theory and Evidence on Secessionist vs Centrist Conflict," Working Papers 609, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    7. Libman Alexander & Feld Lars P., 2013. "Strategic Tax Collection and Fiscal Decentralization: The Case of Russia," German Economic Review, De Gruyter, vol. 14(4), pages 449-482, December.
    8. Dur, Robert & Staal, Klaas, 2008. "Local public good provision, municipal consolidation, and national transfers," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 160-173, March.
    9. Vincent Anesi & Philippe De Donder, 2011. "Voting under the Threat of Secession: Accommodation vs. Repression," CESifo Working Paper Series 3458, CESifo Group Munich.
    10. Anesi, Vincent, 2012. "Secessionism and minority protection in an uncertain world," Journal of Public Economics, Elsevier, vol. 96(1), pages 53-61.
    11. Thierry Madiès & Grégoire Rota-Grasiozi & Jean-Pierre Tranchant & Cyril Trépier, 2018. "The economics of secession: a review of legal, theoretical, and empirical aspects," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 154(1), pages 1-18, December.
    12. Martijn Huysmans & Christophe Crombez, 2020. "Making exit costly but efficient: the political economy of exit clauses and secession," Constitutional Political Economy, Springer, vol. 31(1), pages 89-110, March.
    13. Cerniglia, Floriana & Longaretti, Riccarda & Zanardi, Alberto, 2021. "How to design decentralisation to curb secessionist pressures? Top-down vs. bottom-up reforms," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 377-390.
    14. Alexeev, Michael (Алексеев, Майкл) & Mamedov, Arseny (Мамедов, Арсений) & Fomina, Evgenia (Фомина, Евгения) & Deryugin, Alexander (Дерюгин, Александр), 2017. "Influence of the Main Characteristics of Interbudgetary Relations on the Indicators of Economic Development of the Subjects of the Russian Federation [Влияние Основных Характеристик Межбюджетных От," Working Papers 031717, Russian Presidential Academy of National Economy and Public Administration.
    15. Libman, Alexander, 2010. "Constitutions, regulations, and taxes: Contradictions of different aspects of decentralization," Journal of Comparative Economics, Elsevier, vol. 38(4), pages 395-418, December.
    16. Vincent Anesi & Philippe De Donder, 2011. "Voting under the Threat of Secession: Accommodation vs. Repression," CESifo Working Paper Series 3458, CESifo.
    17. Anesi, Vincent, 2012. "Secessionism and minority protection in an uncertain world," Journal of Public Economics, Elsevier, vol. 96(1), pages 53-61.
    18. Enrico Spolaore, 2016. "The economics of political borders," Chapters, in: Eugene Kontorovich & Francesco Parisi (ed.), Economic Analysis of International Law, chapter 1, pages 11-43, Edward Elgar Publishing.
    19. Che, Jiahua & Chung, Kim-Sau & Lu, Yang K., 2017. "Decentralization and political career concerns," Journal of Public Economics, Elsevier, vol. 145(C), pages 201-210.
    20. Libman, Alexander, 2009. "Constitutions, Regulations, and Taxes: Contradictions of Different Aspects of Decentralization," MPRA Paper 15854, University Library of Munich, Germany.

    More about this item

    Keywords

    Fiscal decentralization; Retention rates; Sub-national political regimes; D73; H11; H77;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:copoec:v:23:y:2012:i:4:p:302-336. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.