In a career-concern model of politics with endogenous candidacy and different types of politicians, following a decentralization reform, politicians with different skills are elected in municipalities characterized by different levels of autonomous resources. As an effect, consumer welfare increases only, or mainly, in richer municipalities. We test these predictions by exploiting the differentiated reduction in Vertical Fiscal Imbalance in Italian municipalities, due to the strong difference in the tax base, following the decentralization reforms of the '90s. Results strongly support our predictions and are robust to several alternative stories.
We employ bootstrap methods (Efron (1979)) to test the effect of an important electoral reform implemented in Italy from 1993 to 2001, that moved the system for electing the Par-liament from purely proportional to plurality rule (for 75% of the seats). We do not find any effect on either the number of parties or the stability of governments (the two main objectives of the reform) that remained unchanged at their pre-reform level
A 1999 reform allowed Italian Mayors to partially substitute a more accountable source of tax revenue (the property tax) with a less transparent one (a surcharge on the personal income tax). Theoretical analysis suggests this should give incompetent Mayors a less costly way to hide themselves, so allowing them to be more easily re-elected. An empirical analysis on Piedmont municipalities confirms these hypotheses.
We compare single ballot vs dual ballot elections under plurality rule, assuming sincere voting and allowing for partly endogenous party formation. Under the dual ballot, the number of parties is larger but the influence of extremist voters on equilibrium policy is smaller, because their bargaining power is reduced compared to a single ballot election. The predictions on the number of parties and on policy volatility are consistent with data on municipal elections in Italy, where cities with more (less) than 15,000 inhabitants have dual (single) ballots respectively.
Politicians are disciplined through the electoral system. But this is often not enough to eliminate political rents. Economists suggest that competition across governments may also help. But intergovernmental competition can take two forms, through tax competition (exit) or yardstick competition (voice). We show these two forms may not, and in general do not, work in the same direction. Tax competition may reduce the screening properties of yardstick competition.
Politicians are disciplined through the electoral system. But this is often not enough to eliminate political rents. Economists suggest that competition across governments may also help. But intergovernmental competition can take two forms, through tax competition (exit) or yardstick competition (voice). We show these two forms may not, and in general do not, work in the same direction. Tax competition may reduce the screening properties of yardstick competition.
Legal and political issues left the management of the 2015-16 refugee crisis mostly in the hands of national governments, but this is incompatible with an integrated economic area that has largely abolished internal borders. It is also incompatible with some founding European Union principles, such as the existence of a common European policy on the mobility of people. A greater role for European institutions and policies is needed both for policing the common borders and imposing common welcome policy standards for refugees, based on best practices. EU measures are also required to face the long-term problems related to immigration, as it is very likely that economic and demographic differences between the EU and neighbouring countries will lead to further crises in the future. Planning for this requires ample and dedicated resources, and a long-term strategy based on agreements with immigrants' countries of origin, a task that no EU country can pursue alone. Some progress has been made to strengthen the role of the EU, with the adoption of new directives, such as the Asylum Procedures Directive, and the establishment of the European Border and Coast Guard Agency. However, the situation is still far from satisfactory. There are major differences in refugee welcome and integration policies in EU countries, as shown by differences in asylum request outcomes in different countries and the different integration processes. There is also a serious lack of information about the skills and competences of refugees in different countries. This is a problem because this information is a necessary first step for an integrated welcome policy that might transform a challenge into an opportunity for aging European economies. Such differences between EU countries are not only inequitable but also inefficient. They lead to massive distortions in the functioning of European labour markets and create incentives for refugees to seek asylum in specific countries. Moreover, the promise made by EU institutions of a refugee relocation programme is presently not being kept, leaving the countries of first entry to carry disproportionate burdens. Legal procedures are part of the problem because the Dublin Regulation, approved under different circumstances, obliges the first-entry country to examine asylum requests. However, political obstacles play the main role. EU countries are very different in terms of their cultural attitudes towards immigration and it is difficult to impose a common solution on them. Practical solutions, based on the countries that do not want refugees making compensation payments, are probably the most realistic avenues to follow.
