Clean-air

POLITICAL CENTRALISATION INCREASES GOVERNMENT ACCOUNTABILITY

Political centralisation increases overall government accountability to the public, according to research by Federico Boffa, Amedeo Piolatto and Giacomo Ponzetto. This is because the more accountable regions within a country effectively ‘export’ their accountability to the less accountable areas, making the government more accountable overall.

The study, presented at the Royal Economic Society’s 2013 annual conference, shows this by analysing data on pollution regulation in the US in the 1970s. But the results have contemporary relevance, as the authors conclude:

‘Centralisation can increase welfare in every region, given the right balance between uniform and discretionary federal policies.

‘Thus, our theory helps explain the steady expansion of the federal government throughout US history and it can account for the growth of the powers of the European Union in recent decades and speak to the viability of increased centralisation at the European level.’

The analysis starts with a fundamental problem of politics in that there is always the risk that rulers will abuse their power and seize government resources. Elections are meant to constrain such behaviour by voting the government out of office if they don’t do their jobs, but often politicians can hide their behaviour or blame poor performance on circumstances beyond their control. The better-informed citizens are, the less likely politicians are to get away with abuse of power and the more accountable they will have to be to voters.

The study models the link between voter information and political accountability. It shows that while more information leads to more accountability, this relationship is subject to ‘decreasing returns’, with ever-increasing information leading to ever-smaller increases in accountability.

As a result, centralisation improves government performance when voters are more informed in some regions than others. The federal government, which faces an electorate with average information, is much more efficient than local governments in regions whose residents are less informed than average, but only slightly less efficient than those in regions with above-average information.

The researchers test this prediction using data on pollution and newspaper circulation in the US before and after the enactment of the Clean Air Act of 1970, which transferred responsibility for pollution regulation from the state and local governments to the federal Environment Protection Agency.

The analysis shows that federal intervention led to a greater decrease in pollution in states with lower newspaper readership. States where newspaper circulation per person was lower than average by the equivalent of one more newspaper for every two people, the rate of decline of polluting emissions was higher by one percentage point per year for nitrogen oxides and two percentage points per year for sulphur dioxide.

Because not all federal policies are uniform, the authors argue that in some cases the federal government will favour the more accountable states, thus increasing their welfare as well.

More…

Institutional quality and government efficiency vary widely across countries within the European Union, and even across regions of a single country like the United States. This study shows that because of such regional differences, political centralisation increases government accountability.

The results contrast with the conventional wisdom that stresses the virtues of subsidiarity and competition between local governments; yet they reflect a simple insight. When regions differ in their residents’ ability to monitor public officials, the federal government is held accountable by the most capable citizens in the whole union.

Thus, higher-accountability regions export their institutional quality to the lower-accountability members of the federation. The ensuing regional distribution of the efficiency gains from centralisation is reflected in empirical evidence on environmental policy in the United States. The study documents that states with lower political accountability reaped the highest benefits when the federal government took over pollution regulation in 1970.

The analysis starts from the fundamental problem of political agency. Rulers may misallocate personal effort and government resources. Such rent-seeking behaviour is constrained by electoral discipline: voters will oust the incumbent government if they observe insufficient public goods provision. Better information helps citizens assess government performance more accurately, thereby improving politicians’ incentives and their selection.

The model proves that the link between voter information and political accountability is subject to decreasing returns. The more informed the citizens, the better the government, but the smaller the additional improvement that a further rise in voter knowledge would entail.

Therefore, centralisation improves government performance when voters are more informed in some regions than others. The federal government, which faces an electorate with average information, is much more efficient than local governments in regions whose residents are less informed than average, but only slightly less efficient than those in regions with above-average information.

When the central government sets a uniform policy for the whole union, each region benefits in inverse proportion to its residents’ information. The researchers test this prediction using data on pollution and newspaper circulation in the United States before and after the enactment of the Clean Air Act of 1970, which transferred responsibility for pollution regulation from the state and local governments to the federal Environment Protection Agency.

The econometric analysis establishes that federal intervention induced a greater decrease in pollution in states with lower newspaper readership. This empirical result is robust to controls for alternative determinants of pollution, including income, population density, specialisation in manufacturing and political ideology.

If newspaper circulation in 1970 differed across two states by an amount equal to the standard deviation of the cross-state distribution (.05 copies per person), the rate of decline of polluting emissions in the 1970s compared with the 1960s was higher in the less informed state by one percentage point per year for nitrogen oxides, and two for sulphur dioxide. The figure below depicts the structural break associated with centralisation and its disproportionate impact on less informed states.


Since centralisation transfers accountability from the more to the less informed regions, must it harm the former? No, because not all federal policies are uniform. When the central government has discretion to provide different public goods to different regions, it will favour the more informed voters who monitor it most closely. Centralisation can increase welfare in every region, given the right balance between uniform and discretionary federal policies.

Thus, the theory helps to explain the steady expansion of the federal government throughout US history, and it can both account for the growth of the powers of the European Union in recent decades and speak to the viability of increased centralisation at the European level.

ENDS


Contact:

Federico Boffa (federico.boffa@unimc.it)
Amedeo Piolatto (piolatto@ub.edu)
Giacomo AM Ponzetto (gponzetto@crei.cat)

RES media consultant Romesh Vaitilingam:
+44 (0) 7768 661095
romesh@vaitilingam.com
@econromesh

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