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Incumbent behavior: vote seeking, tax setting and yardstick competition

By Timothy Besley and Anne Case

Abstract

This paper develops a model of the political economy of tax-setting in a multijurisdictional world, where voters' choices and incumbent behavior are determined simultaneously. Voters are assumed to make comparisons between jurisdictions to overcome political agency problems. This forces incumbents into a (yardstick)competition in which they care about what other incumbents are doing. We provide a theoretical framework and empirical evidence using U.S. state data from 1960 to 1988. The results are encouraging to the view that vote-seeking and tax-setting are tied together through the nexus of yardstick competition

Topics: HB Economic Theory, HJ Public Finance, JA Political science (General)
Publisher: American Economic Association
Year: 1995
OAI identifier: oai:eprints.lse.ac.uk:1220
Provided by: LSE Research Online
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