Essays on the Political Economy of the Centralized Provision of Local Public Goods

• Main Author: Joanis, Marcelin
• Other Authors: McMillan, Robert
• Format: Others
• Language: en_ca
• Published: 2008
• Subjects: local public goods; political economy; fiscal federalism; distributive politics; school finance; accountability; No Child Left Behind; infrastructure spending; Quebec; California; 0501
• Online Access: http://hdl.handle.net/1807/16751

This thesis explores the political economy aspects of the provision of local public goods by higher levels of government. Chapter 1 focuses on local public goods as instruments for special interest politics at the supra-local level, with an emphasis on public infrastructure. To capture the implications of long-run relationships between political parties and their loyal supporters, I set out a dynamic probabilistic voting model which predicts that the geographic pattern of spending depends on the way the government balances long-run `machine politics' considerations with the more immediate concern to win over swing voters. To assess the empirical relevance of both forces, I analyse rich data on road spending from a panel of electoral districts in Québec. Empirical results exploiting the province's linguistic fragmentation provide robust evidence that partisan loyalty is a key driver of the geographic allocation of spending. Chapter 2 proposes a theoretical framework to analyse the coexistence of multiple tiers of government in local public good provision. I study the effects of such partial decentralization on accountability using a two-period political agency model, in which two levels of government are involved in public good provision and voters are imperfectly informed about each government's contribution to the public good. The model predicts that the net effect of a departure from complete centralization (or decentralization) balances the benefits of vertical complementarity against the loss of accountability following from imperfect information and detrimental vertical interactions. Chapter 3 investigates the impact of partial decentralization on local electoral accountability in the context of California's school finance system. I exploit the peculiarities California's school finance system and the federal No Child Left Behind Act of 2001 to estimate the extent to which politicians are punished or rewarded for observed policy outcomes, and how this channel is affected by the degree of centralization. Results show that voters are responsive to differences in dropout rates and pupil-teacher ratios, and that incumbents are less likely to be reelected when a district's degree of centralization is high. Increased federal involvement after 2001 is associated with sharper local electoral accountability.