American Economic Review Vol. 85 No. 1 1995
Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition
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.
- Volume
- 85
- Issue
- 1
- Pages
- 25-45
- Sources
- bibtex:phds-export.bib