IDEAS home Printed from https://ideas.repec.org/p/cge/wacage/126.html
   My bibliography  Save this paper

Political Competition, Tax Salience and Accountability: Theory and Some Evidence from Italy

Author

Listed:
  • Bracco, Emanuele

    (University of Lancaster)

  • Porcelli, Francesco

    (University of Warwick)

  • Redoano, Michela

    (University of Warwick)

Abstract

This paper argues that high political competition does not necessarily induce policy makers to perform better as previous research has shown. We develop a political economy model and we show that when political competition is tight, and elected politicians can rely on more tax instruments, they will substitute salient taxes with less salient ones, which are not necessarily preferable. These predictions are largely confirmed using a dataset on Italian municipal elections and taxes.

Suggested Citation

  • Bracco, Emanuele & Porcelli, Francesco & Redoano, Michela, 2013. "Political Competition, Tax Salience and Accountability: Theory and Some Evidence from Italy," CAGE Online Working Paper Series 126, Competitive Advantage in the Global Economy (CAGE).
    • Handle: RePEc:cge:wacage:126
    as

    Download full text from publisher

    File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/126.2013_redoano.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Besley, Timothy & Smart, Michael, 2007. "Fiscal restraints and voter welfare," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 755-773, April.
    2. Solé-Ollé, Albert & Sorribas-Navarro, Pilar, 2008. "The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain," Journal of Public Economics, Elsevier, vol. 92(12), pages 2302-2319, December.
    3. Hindriks, Jean & Lockwood, Ben, 2009. "Decentralization and electoral accountability: Incentives, separation and voter welfare," European Journal of Political Economy, Elsevier, vol. 25(3), pages 385-397, September.
    4. David S. Lee & Thomas Lemieux, 2010. "Regression Discontinuity Designs in Economics," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 281-355, June.
    5. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
    6. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-1235, December.
    7. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-1177, September.
    8. Stefano Gagliarducci & Tommaso Nannicini & Paolo Naticchioni, 2007. "Outside Income and Moral Hazard: The Elusive Quest for Good Politicians," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-164, Boston University - Department of Economics.
    9. Arulampalam, Wiji & Dasgupta, Sugato & Dhillon, Amrita & Dutta, Bhaskar, 2009. "Electoral goals and center-state transfers: A theoretical model and empirical evidence from India," Journal of Development Economics, Elsevier, vol. 88(1), pages 103-119, January.
    10. Dixit, Avinash & Londregan, John, 1998. "Fiscal federalism and redistributive politics," Journal of Public Economics, Elsevier, vol. 68(2), pages 153-180, May.
    11. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    12. Besley, Timothy, 2007. "Principled Agents?: The Political Economy of Good Government," OUP Catalogue, Oxford University Press, number 9780199283910.
    13. Bordignon, Massimo & Grembi, Veronica & Piazza, Santino, 2017. "Who do you blame in local finance? An analysis of municipal financing in Italy," European Journal of Political Economy, Elsevier, vol. 49(C), pages 146-163.
    14. Case, Anne, 2001. "Election goals and income redistribution: Recent evidence from Albania," European Economic Review, Elsevier, vol. 45(3), pages 405-423, March.
    15. Guido Imbens & Karthik Kalyanaraman, 2012. "Optimal Bandwidth Choice for the Regression Discontinuity Estimator," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(3), pages 933-959.
    16. David S. Lee, 2001. "The Electoral Advantage to Incumbency and Voters' Valuation of Politicians' Experience: A Regression Discontinuity Analysis of Elections to the U.S..," NBER Working Papers 8441, National Bureau of Economic Research, Inc.
    17. Marika Cabral & Caroline Hoxby, 2012. "The Hated Property Tax: Salience, Tax Rates, and Tax Revolts," NBER Working Papers 18514, National Bureau of Economic Research, Inc.
    18. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(1), pages 1-16.
    19. Bordignon, Massimo & Minelli, Enrico, 2001. "Rules transparency and political accountability," Journal of Public Economics, Elsevier, vol. 80(1), pages 73-98, April.
    20. James E. Alt & David Dreyer Lassen, 2003. "Fiscal Transparency and Fiscal Policy Outcomes in OECD Countries," EPRU Working Paper Series 03-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    21. Faguet, Jean-Paul, 2004. "Does decentralization increase government responsiveness to local needs?: Evidence from Bolivia," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 867-893, March.
    22. Amy Finkelstein, 2009. "E-ztax: Tax Salience and Tax Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 969-1010.
    23. Lee, David S., 2008. "Randomized experiments from non-random selection in U.S. House elections," Journal of Econometrics, Elsevier, vol. 142(2), pages 675-697, February.
    24. Per Pettersson-Lidbom, 2008. "Do Parties Matter for Economic Outcomes? A Regression-Discontinuity Approach," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1037-1056, 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. Massimiliano Ferraresi & Umberto Galmarini & Leonzio Rizzo & Alberto Zanardi, 2019. "Switch toward tax centralization in Italy: a wake-up for the local political budget cycle," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(4), pages 872-898, August.
    2. Atsuyoshi Morozumi & Francisco José Veiga & Linda Gonçalves Veiga, 2014. "Electoral effects on the composition of public spending and revenue: evidence from a large panel of countries," NIPE Working Papers 23/2014, NIPE - Universidade do Minho.
    3. Altemeyer-Bartscher, Martin, 2014. "Fiscal Equalization, Tax Salience, and Tax Competition," IWH Discussion Papers 3/2014, Halle Institute for Economic Research (IWH).
    4. Bracco, Emanuele, 2018. "A fine collection: The political budget cycle of traffic enforcement," Economics Letters, Elsevier, vol. 164(C), pages 117-120.
    5. Aprile, Maria Carmela & Chiarini, Bruno & Marzano, Elisabetta, 2019. "Land use and decentralized government: A strategic approach for playing a short-sighted equilibrium," Land Use Policy, Elsevier, vol. 89(C).
    6. Bordignon, Massimo & Grembi, Veronica & Piazza, Santino, 2017. "Who do you blame in local finance? An analysis of municipal financing in Italy," European Journal of Political Economy, Elsevier, vol. 49(C), pages 146-163.
    7. Alberto Batinti & Luca Andriani & Andrea Filippetti, 2019. "Local Government Fiscal Policy, Social Capital and Electoral Payoff: Evidence across Italian Municipalities," Kyklos, Wiley Blackwell, vol. 72(4), pages 503-526, November.
    8. Alberto Batinti & Andrea Filippetti & Luca Andriani, 2017. "Why Does Social Capital Increase Government Performance? The Role of Local Elections across Italian Municipalities," Management Working Papers 13, Birkbeck Department of Management, revised Apr 2017.
    9. Brian Chi-ang Lin & Siqi Zheng & Marie Briguglio, 2016. "Household Cooperation In Waste Management: Initial Conditions And Intervention," Journal of Economic Surveys, Wiley Blackwell, vol. 30(3), pages 497-525, July.
    10. Altemeyer-Bartscher, Martin & Zeddies, Götz, 2017. "Bracket creeps: Bane or boon for the stability of numerical budget rules?," IWH Discussion Papers 29/2016, Halle Institute for Economic Research (IWH), revised 2017.
    11. Sutirtha Bagchi, 2013. "The Effects of Political Competition on the Funding and Generosity of Public-Sector Pension Plans," 2013 Papers pba941, Job Market Papers.
    12. Tommaso Giommoni, 2019. "Does progressivity always lead to progress? The impact of local redistribution on tax manipulation," CESifo Working Paper Series 7588, CESifo.
    13. Křápek Milan & Formanová Lucie, 2017. "Proposal for an Alternative Indicator for Testing the Presence of the Political-Budget Cycle in the Case of Tax Policy," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 10(2), pages 229-249, December.

    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. Bracco, Emanuele & Porcelli, Francesco & Redoano, Michela, 2019. "Political competition, tax salience and accountability. Theory and evidence from Italy," European Journal of Political Economy, Elsevier, vol. 58(C), pages 138-163.
    2. Bracco, Emanuele & Lockwood, Ben & Porcelli, Francesco & Redoano, Michela, 2015. "Intergovernmental grants as signals and the alignment effect: Theory and evidence," Journal of Public Economics, Elsevier, vol. 123(C), pages 78-91.
    3. Marta Curto-Grau (Universitat de Barcelona) & Albert Sole-Olle (Universitat de Barcelona) & Pilar Sorribas-Navarro(Universitat de Barcelona), 2012. "Partisan targeting of inter-governmental transfers & state interference in local elections: evidence from Spain," Working Papers in Economics 288, Universitat de Barcelona. Espai de Recerca en Economia.
    4. Marta Curto-Grau (Universitat de Barcelona) & Albert Sole-Olle (Universitat de Barcelona) & Pilar Sorribas-Navarro(Universitat de Barcelona), 2012. "Partisan targeting of inter-governmental transfers & state interference in local elections: evidence from Spain," Working Papers in Economics 288, Universitat de Barcelona. Espai de Recerca en Economia.
    5. Bracco, Emanuele & Redoano, Michela & Porcelli, Francesco, 2012. "Incumbent Effects and Partisan Alignment in Local Elections: a Regression Discontinuity Analysis Using Italian Data," CAGE Online Working Paper Series 87, Competitive Advantage in the Global Economy (CAGE).
    6. Bordignon, Massimo & Grembi, Veronica & Piazza, Santino, 2017. "Who do you blame in local finance? An analysis of municipal financing in Italy," European Journal of Political Economy, Elsevier, vol. 49(C), pages 146-163.
    7. Marta Curto-Grau & Albert Solé-Ollé & Pilar Sorribas-Navarro, 2012. "Partisan targeting of inter-governmental transfers & state interference in local elections: evidence from Spain," Working Papers 2012/31, Institut d'Economia de Barcelona (IEB).
    8. Rafael Alves de Albuquerque Tavares, 2017. "Does Political Party Matter? Evidence from Close Races for Mais Médicos para o Brasil," Working Papers, Department of Economics 2017_05, University of São Paulo (FEA-USP).
    9. Joaquín Artés & Ignacio Jurado, 2018. "Government fragmentation and fiscal deficits: a regression discontinuity approach," Public Choice, Springer, vol. 175(3), pages 367-391, June.
    10. Mauricio Villamizar‐Villegas & Freddy A. Pinzon‐Puerto & Maria Alejandra Ruiz‐Sanchez, 2022. "A comprehensive history of regression discontinuity designs: An empirical survey of the last 60 years," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1130-1178, September.
    11. Christa N. Brunnschweiler & Samuel Kwabena Obeng, 2020. "Rewarding Allegiance: Political Alignment and Fiscal Outcomes in Local Government," University of East Anglia School of Economics Working Paper Series 2020-05, School of Economics, University of East Anglia, Norwich, UK..
    12. Josip Glaurdić & Vuk Vuković, 2017. "Granting votes: exposing the political bias of intergovernmental grants using the within-between specification for panel data," Public Choice, Springer, vol. 171(1), pages 223-241, April.
    13. Agnese Sacchi & Simone Salotti, 2016. "A Comprehensive Analysis of Expenditure Decentralization and of the Composition of Local Public Spending," Regional Studies, Taylor & Francis Journals, vol. 50(1), pages 93-109, January.
    14. Leandro M. de Magalhães, 2011. "Political Parties and the Tax Level in the American States: A Regression Discontinuity Design," Bristol Economics Discussion Papers 11/622, School of Economics, University of Bristol, UK.
    15. Kantorowicz, Jarosław & Köppl–Turyna, Monika, 2019. "Disentangling the fiscal effects of local constitutions," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 63-87.
    16. Emanuele Bracco & Alberto Brugnoli, 2012. "Runoff vs. plurality," Working Papers 23767067, Lancaster University Management School, Economics Department.
    17. Quaresima Federico & Santolini Raffaella & Fiorillo Fabio, 2020. "Political affiliation in post-parliamentary careers in Italian public enterprises," German Economic Review, De Gruyter, vol. 21(1), pages 35-64, April.
    18. Gutierrez, Emilio, 2015. "Fighting Crime with a Little Help from my Friends: Political Alignment, Inter-Jurisdictional Cooperation and Crime in Mexico," CEPR Discussion Papers 10769, C.E.P.R. Discussion Papers.
    19. David S. Lee & Thomas Lemieux, 2010. "Regression Discontinuity Designs in Economics," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 281-355, June.
    20. Thomas Fujiwara & Carlos Sanz, 2017. "Norms in bargaining: evidence from government formation in Spain," Working Papers 1741, Banco de España.

    More about this item

    Keywords

    Political Competition; Government; Accountability; Tax Salience.;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

    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:cge:wacage:126. 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: Jane Snape (email available below). General contact details of provider: https://edirc.repec.org/data/dewaruk.html .

    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.