Bracco, Emanuele Porcelli, Francesco Redoano, Michela
Year of Publication:
CESifo Working Paper 4167
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.
political competition government accountability tax salience