By Mark P. Jones, Osvaldo Meloni and Mariano Tommasi
This paper posits 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. The authors 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).
Published July 2012 in Economics & Politics
July 22, 2012, 4:35 p.m.