Political Competition, Tax Salience and Accountability: Theory and Some Evidence from Italy
43 Pages Posted: 5 Apr 2013
Date Written: March 31, 2013
This paper argues that high political competition does not necessarily induce policy makers to perform better as previous research has shown. We develop a political economy model and we show that when political competition is tight, and elected politicians can rely on more tax instruments, they will substitute salient taxes with less salient ones, which are not necessarily preferable. These predictions are largely confirmed using a dataset on Italian municipal elections and taxes.
Keywords: political competition, government, accountability, tax salience
JEL Classification: H110, H200, H770, H870, D700, N120
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