Jonathan Rodden

The Dilemma of Fiscal Federalism: Grants and Fiscal Performance around the World

This paper uses cross-national data to examine the effects of federal fiscal and political institutions on the fiscal performance of subnational governments. Balanced budgets among subnational governments are found when either (1) the center imposes strong borrowing restrictions or (2) subnational governments have both wide-ranging taxing and borrowing autonomy. Large and persistent aggregate deficits occur when subnational governments are simultaneously dependent on general-purpose intergovernmental transfers and free to borrow-a combination found most frequently among constituent units in federations. Time-series cross-section analysis reveals that as countries increase their reliance on transfers over time, subnational and overall fiscal performance decline, especially when subnational governments have easy access to credit. These findings illuminate a key dilemma of fiscal federalism and a more precise notion of its dangers: When constitutionally constrained or politically fragmented central governments take on heavy co-financing obligations, they cannot credibly commit to ignore the fiscal problems of lower-level governments.

Reviving Leviathan: Fiscal Federalism and the Growth of Government

This article revisits the influential “Leviathan” hypothesis, which posits that tax competition limits the growth of government spending in decentralized countries. I use panel data to examine the effect of fiscal decentralization over time within countries, attempting to distinguish between decentralization that is funded by intergovernmental transfers and local taxation. First, I explore the logic whereby decentralization should restrict government spending if state and local governments have wide-ranging authority to set the tax base and rate, especially on mobile assets. In countries where this is most clearly the case, decentralization is associated with smaller government. Second, consistent with theoretical arguments drawn from welfare economics and positive political economy, I show that governments grow faster as they fund a greater portion of public expenditures through intergovernmental transfers.

The Strength of Issues: Using Multiple Measures to Gauge Preference Stability, Ideological Constraint, and Issue Voting

A venerable supposition of American survey research is that the vast majority of voters have incoherent and unstable preferences about political issues, which in turn have little impact on vote choice. We demonstrate that these findings are manifestations of measurement error associated with individual survey items. First, we show that averaging a large number of survey items on the same broadly defined issue area—for example, government involvement in the economy, or moral issues—eliminates a large amount of measurement error and reveals issue preferences that are well structured and stable. This stability increases steadily as the number of survey items increases and can approach that of party identification. Second, we show that once measurement error has been reduced through the use of multiple measures, issue preferences have much greater explanatory power in models of presidential vote choice, again approaching that of party identification.

Strength in numbers? Representation and redistribution in the European Union

This article examines the relationship between territorial representation and fiscal redistribution in the European Union. Given that small states are vastly overrepresented in both the European Parliament and the Council of Ministers, models of legislative vote-buying predict that overrepresented member states will be systematically favored in the distribution of EU fiscal transfers. Empirical analysis of each manifestation of the EC or EU from 1977 to 1999 reveals a strong linear relationship between votes and transfers per capita during each period. This is true for both agricultural and regional development transfers as well as total net transfers. The paper concludes by reflecting on the importance of the connection between representation and redistribution as the European Union prepares to enlarge.

Does Religion Distract the Poor? Income and Issue Voting Around the World

This article asks whether religion undermines the negative relationship between income and left voting that is assumed in standard political economy models of democracy. Analysis of cross-country survey data reveals that this correlation disappears among religious individuals in countries that use proportional representation. This is the case in large part because there is a moral values dimension that has a correlation with income that is equal in magnitude but has the opposite sign as the economic dimension, and the votes of the religious are better explained by their positions on moral than economic issues, especially in countries with multiparty systems. The authors conclude by discussing implications for theories of redistribution.

How Should We Measure District-Level Public Opinion on Individual Issues?

Due to insufficient sample sizes in national surveys, strikingly little is known about public opinion at the level of Congressional and state legislative districts in the United States. As a result, there has been virtually no study of whether legislators accurately represent the will of their constituents on individual issues. This article solves this problem by developing a multilevel regression and poststratification (MRP) model that combines survey and census data to estimate public opinion at the district level. We show that MRP estimates are excellent predictors of public opinion and referenda results for both congressional and state senate districts. Moreover, they have less error, higher correlations, and lower variance than either disaggregated survey estimates or presidential vote shares. The MRP approach provides American and Comparative Politics scholars with a valuable new tool to measure issue-specific public opinion at low levels of geographic aggregation.

Fiscal Decentralization and the Business Cycle: An Empirical Study of Seven Federations

Although fiscal policies of central governments sometimes provide modest insurance against regional income shocks, this paper shows that procyclical fiscal policy among provincial governments can easily overwhelm these stabilizing effects. We examine the cyclicality of budget items among provincial governments in seven federations, showing that own-source taxes are generally highly procyclical, and contrary to common wisdom, revenue sharing and discretionary transfers are either acyclical or procyclical. Constituent governments are thus left alone to smooth their own shocks, and we document the extent to which various restraints on borrowing and saving undermine their ability to do so. The resulting procyclicality of provincial fiscal policy is likely to have important implications in a world where demands for countercyclical fiscal policy are increasing but considerable fiscal responsibilities are being devolved to subnational governments.

Dual accountability and the nationalization of party competition: Evidence from four federations

This paper assesses the extent to which party systems are nationalized in four federations. In doing so, the research addresses two questions. First, is dual accountability operational across decentralized countries, or do sub-national voters turn to national cues as a means to economize in a complex information environment? By bringing a cross-national dataset to bear on this question, we are able to provide insight into where and why dual accountability might operate. Second, what explains variation in the extent to which party systems are nationalized across countries and time? We build on previous literature to suggest a number of factors likely to impact the extent of nationalization. We examine those factors in the context of provincial-level elections in Argentina, Canada, Germany and the United States. Using national and sub-national economic data, we find little evidence of dual accountability in any of our countries. We find that economic performance matters little for regional electoral outcomes, and where it does, sub-national outcomes reflect national rather than sub-national conditions. More important are the roles of partisan relations across levels of government and election timing. Sub-national co-partisans of the nationally governing party lose votes, particularly as the time from the most recent national election grows. The strength of these effects varies across our cases in predictable ways.

Política distributiva na Federação: estratégias eleitorais, barganhas legislativas e coalizões de governo

This article discusses and tests different hypotheses about electoral and legislative strategies in Brazil, which is a federation with a strong president, over-representation in both chambers, and members of the legislative branch who are encouraged to seek funds for their constituencies. It examines the geographical distribution of budget and extra-budgetary funds during the period from 1990-2000 and measures the relative importance of captive and undecided districts, over-represented states, state governments, congressional party coalitions and indicators of poverty. It concludes that Brazilian presidents have considerable power over the transfer of resources and use it to preserve their political base in congress. They channel the resources available to them to the states with the largest number of legislators in the governing coalition.

Federalism and Inter-Regional Redistribution

Why do some federations implement highly progressive intergovernmental transfer schemes while others do not? First, this essay establishes some stylized facts, using provincial-level data from nine federations to measure the extent of inter-regional redistribution achieved through intergovernmental transfers in each country. Second, it explores sources of institutional variation that might help account for these persistent cross-country differences, focusing on theories of legislative bargaining, representation, and the distribution of income across regions. Third, it examines the historical conditions under which the basic institutions of federalism were selected.