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Centralization and Accountability : Theory and Evidence from the Clean Air Act

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Abstract

This paper studies fiscal federalism when voter information varies across regions. We develop a model of political agency with heterogeneously informed voters. Rent-seeking politicians provide public goods to win the votes of the informed. As a result, rent extraction is lower in regions with higher information. In equilibrium, electoral discipline has decreasing returns. Thus, political centralization reduces aggregate rent extraction. When the central government provides public goods uniformly across space, the model predicts that a region’s benefits from centralization are decreasing in its residents’ information. We test this prediction using panel data on pollutant emissions and newspaper circulation across the United States. The 1970 Clean Air Act centralized environmental policy at the federal level. In line with our theory, we find that centralization induced a faster decrease in pollution in less informed states.
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  • Boffa, F. & Piolatto, A. & Ponzetto, G.A.M., 2012. "Centralization and Accountability : Theory and Evidence from the Clean Air Act," Other publications TiSEM 5f85162a-a2b2-4089-b7ea-7, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:5f85162a-a2b2-4089-b7ea-73612558d662
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    1. Chen, Jidong & Shi, Xinzheng & Zhang, Ming-ang & Zhang, Sihan, 2024. "Centralization of environmental administration and air pollution: Evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 126(C).

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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