One of the most cherished propositions in economics is that market competition by and large raises consumer welfare. But whether political competition has similarly virtuous consequences is far less discussed. This paper formulates a model to explain why political competition may enhance...

The paper studies the effect of additional government revenues on political corruption and on the quality of politicians, both with theory and data. The theory is based on a version of the career concerns model of political agency with endogenous entry of political candidates. The evidence...

We study the dynamic support for fiscal decentralization in a political agency model from the perspective of a region. We show that corruption opportunities are lower under centralization at each period of time. However, centralization makes more difficult for citizens to detect corrupt...

This Paper provides a simple theoretical framework for analysing simultaneous vertical and horizontal competition in excise taxes, and estimates equations informed by the theory on a panel of US state and federal excise taxes on cigarettes and gasoline. We also examine the role played by...

Performance-based promotion schemes in administrative hierarchies have limitations. Chinese provincial leaders, despite facing strong career concerns, make different policy decisions depending on their career backgrounds. Provincial party secretaries who rose from low to high positions within...

China’s economic reforms have resulted in spectacular growth and poverty reduction. However, China’s institutions look ill-suited to achieve such a result, and they indeed suffer from serious shortcomings. To solve "China puzzle" this paper analyses China’s institution - a regionally...

The paper studies a federal system where a region provides non-contractible essential inputs for the successful implementation of a local public policy project with spill-overs, and where bargaining between different levels of government may ensure efficient decision making ex post. We ask...

The optimal degree of decentralization depends on the importance of inter-state externalities of local policies. We show that inter-state externalities are determined by spatial distribution of interest groups within the country. Interest groups who have multi-state scope internalize inter-state...

Inspired by the current debate over the future of the monetary union in Europe, this paper provides a simple model for the determination of the conditions of survival of the common good, which requires the creation of an effective fiscal union. We highlight the importance of institutional design...

Large public bureaucracies are commonly regarded as less efficient than modern private corporations. This paper explores how the degree of discretionary power might account for this difference in efficiency. Indeed, increasing the discretionary power of the intermediate layers of an organization...