Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102109
Authors: 
Jametti, Mario
Joanis, Marcelin
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4791
Abstract: 
This paper empirically investigates the underlying determinants of expenditure decentral- ization, based on the predictions of a new political economy model of partial decentralization. The analysis is based on an agency model, in which two levels of government are involved in the provision of a public good and voters are imperfectly informed about each government's contribution to the good, creating a shared accountability problem. Under shared expenditure responsibility, the degree of decentralization is endogenous and depends on the relative politi- cal conditions prevailing at each level of government. Consistent with the model's predictions, empirical results from a panel of Canadian provinces show that decentralization in a province increases with the electoral strength of the provincial government and decreases with the electoral strength of the federal government, in addition to being affected significantly by the partisan affiliation of both levels of government. A series of alternative empirical specifications, including an IV regression exploiting campaign spending data, are presented to assess the robustness of these results.
Subjects: 
fiscal decentralization
fiscal federalism
vertical interactions
partial decentralization
elections
JEL: 
R50
H77
D72
Document Type: 
Working Paper

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