Centralization and Accountability: Theory and Evidence from the Clean Air Act

F. Boffa, A. Piolatto, G.A.M. Ponzetto

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Abstract

Abstract: This paper studies fiscal federalism when voter information varies across regions. We develop a model of political agency with heterogeneously informed voters. Rentseeking politicians provide public goods to win the votes of the informed. As a result, rent extraction is lower in regions with higher information. In equilibrium, electoral discipline has decreasing returns. Thus, political centralization e¢ ciently reduces aggregate rent extraction. The model predicts that a region's benefits from centralization are decreasing in its residents' information. We test this prediction using panel data on pollutant emissions across U.S. states. The 1970 Clean Air Act centralized environ- mental policy at the federal level. In line with our theory, we find that centralization induced a differential decrease in pollution for uninformed relative to informed states.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages50
Volume2012-033
Publication statusPublished - 2012

Publication series

NameCentER Discussion Paper
Volume2012-033

Keywords

  • Political centralization
  • Government accountability
  • Imperfect information
  • Interregional heterogeneity
  • Elections
  • Environmental policy
  • Air pollution

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    Boffa, F., Piolatto, A., & Ponzetto, G. A. M. (2012). Centralization and Accountability: Theory and Evidence from the Clean Air Act. (CentER Discussion Paper; Vol. 2012-033). Economics.