The Political Competition-Economic Performance Puzzle: Evidence from the OECD Countries and the Italian Regions

36 Pages Posted: 3 Oct 2008

See all articles by Fabio Padovano

Fabio Padovano

University of Rome III - Department of Political Sciences

Roberto Ricciuti

University of Verona - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 2008

Abstract

Empirical tests of the theories on the relationship between political competition and economic performance generate a puzzle: data tend to support the theory at the lower levels of government, but not in panels of countries. We argue that the larger set of policy instruments reduces the tax price of votes at the national level, increasing the incentives to use distortionary redistributive policies to win contested elections. Moreover, constitutions reserve competencies with a high ideological potential to the national government, reducing swing voters' responsiveness to the economic performance of the central government. We thus expect political competition to produce efficiency-oriented policies at the sub-national level compared to the national one. We test this hypothesis on a panel of 24 OECD countries over 1974-2000 and a panel of 15 Italian regions over 1984-2000 and find support for our predictions.

Keywords: political competition, growth, redistribution, national and regional government

JEL Classification: D78, H71, H72, O17

Suggested Citation

Padovano, Fabio and Ricciuti, Roberto, The Political Competition-Economic Performance Puzzle: Evidence from the OECD Countries and the Italian Regions (September 2008). CESifo Working Paper Series No. 2411, Available at SSRN: https://ssrn.com/abstract=1277107

Fabio Padovano

University of Rome III - Department of Political Sciences ( email )

Cia Corrado Segre 2
Roma, 00146
Italy
+390655176402 (Phone)
+390655176234 (Fax)

Roberto Ricciuti (Contact Author)

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
37129 Verona
Italy

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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