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Regional competition, business politicians, and subnational fiscal policy

Baccini, Leonardo; Li, Quan; Mirkina, Irina LU and Johnson, Kristina (2018) In Business and Politics 20(3). p.410-437
Abstract
What explains subnational policy choices over tax cut after decentralization? We test two different explanations in the context of the 2002 tax reform in Russia. A popular strand of literature suggests that decentralization induces more regional competition over investment, motivating subnational tax cuts. A second body of literature suggests that personal business interests of regional governors can account for their different policy choices. Governors with personal business ties refrain from tax cuts because they increase market competition. We find no support for the regional competition hypothesis, but strong statistical evidence for the business connection hypothesis. Our findings have important implications for research on fiscal... (More)
What explains subnational policy choices over tax cut after decentralization? We test two different explanations in the context of the 2002 tax reform in Russia. A popular strand of literature suggests that decentralization induces more regional competition over investment, motivating subnational tax cuts. A second body of literature suggests that personal business interests of regional governors can account for their different policy choices. Governors with personal business ties refrain from tax cuts because they increase market competition. We find no support for the regional competition hypothesis, but strong statistical evidence for the business connection hypothesis. Our findings have important implications for research on fiscal decentralization and on the connections between business interests of leaders and their policy choices. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Fiscal Policy, Decentralisation, Russia
in
Business and Politics
volume
20
issue
3
pages
410 - 437
external identifiers
  • scopus:85051062107
DOI
10.1017/bap.2018.3
language
English
LU publication?
yes
id
27ce226c-8ed2-48f4-81e3-75e722fd126e
date added to LUP
2018-07-05 16:38:38
date last changed
2019-02-20 11:21:45
@article{27ce226c-8ed2-48f4-81e3-75e722fd126e,
  abstract     = {What explains subnational policy choices over tax cut after decentralization? We test two different explanations in the context of the 2002 tax reform in Russia. A popular strand of literature suggests that decentralization induces more regional competition over investment, motivating subnational tax cuts. A second body of literature suggests that personal business interests of regional governors can account for their different policy choices. Governors with personal business ties refrain from tax cuts because they increase market competition. We find no support for the regional competition hypothesis, but strong statistical evidence for the business connection hypothesis. Our findings have important implications for research on fiscal decentralization and on the connections between business interests of leaders and their policy choices.},
  author       = {Baccini, Leonardo and Li, Quan and Mirkina, Irina and Johnson, Kristina},
  keyword      = {Fiscal Policy,Decentralisation,Russia},
  language     = {eng},
  number       = {3},
  pages        = {410--437},
  series       = {Business and Politics},
  title        = {Regional competition, business politicians, and subnational fiscal policy},
  url          = {http://dx.doi.org/10.1017/bap.2018.3},
  volume       = {20},
  year         = {2018},
}