A model on interests representation and;accountability in small local governments

Second generation theory of fiscal federalism do not consider two questions. 1) In small councils the relation between citizens and administrators is stronger than the one depicted in accountability models: in a small councils, citizens know directly and personally the administrators and they control them daily, not only in the electoral dates. 2) Local governments interpret and represent the local citizens' wishes to central government. Thus, they bargain with central government in order to represent local interests at central level. In this paper, even if governments are non benevolent both at local and central level, the accuracy in interpreting citizens' wishes is higher in small councils than in big ones, because citizens' control is higher in the former. On the contrary, the capacity of a council to make its requests be satisfied by central government is higher for a big council than for a small one. Thus, when the dimension of local government increases, the effectiveness of representation activity increases, but the objectives of citizens diverge from administrators' ones. Citizens face a trade-off between the strength of their local council in representing their interests at central level and the accuracy (accountability) in representing them. In this paper we propose a model which can tackle these two issues, we investigate on advantages of a territorial reform and we empirically validate the model.