Fiscal Decentralization, Electoral Accountability, and Fiscal Uniformity ¤

This paper studies the relationship between …scal decentralization and electoral accountability, in a setting where decentralization impacts upon incentive and selection e¤ects of elections. The e¤ect of …scal centralization on voter welfare works through two channels: (i) via its e¤ect on the probability of pooling by the bad incumbent; (ii) conditional on the probability of pooling, the extent to which, with centralization, the incumbent can divert rents in some regions without this being detected by voters in other regions (selective rent diversion). Both these e¤ects depend on the information structure; whether voters only observe …scal policy in their own region, in all regions More voter information does not necessarily raise voter welfare. Under some conditions, voters would choose uniform …scal policy ex ante (uniform tax rates and also possibly expenditures across regions) to constrain selective rent diversion