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Voters as Fiscal Liberals: Incentives and Accountability in Federal Systems
Author(s) -
Jones Mark P.,
Meloni Osvaldo,
Tommasi Mariano
Publication year - 2012
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/j.1468-0343.2012.00395.x
Subject(s) - microfoundations , economics , incentive , argument (complex analysis) , public spending , fiscal policy , margin (machine learning) , fiscal federalism , public economics , accountability , empirical evidence , monetary economics , macroeconomics , microeconomics , political science , market economy , politics , law , decentralization , biochemistry , chemistry , philosophy , epistemology , machine learning , computer science
Most empirical evidence indicates voters penalize deficits and spending growth. Contrary to this dominant finding, a few recent studies conclude that voters reward public spending. We reconcile these conflicting findings, positing that the structure of fiscal federalism in countries like Argentina causes voters to reward fiscal expansion because they perceive that this extra spending at the margin is not financed by them, but rather by the nation at large. We provide evidence and microfoundations for the electoral connection implicit in this argument: voters reward public spending when they can pass the cost on to someone else (e.g., as in Argentina), and punish it otherwise (e.g., as in the United States).