Small Is Beautiful, at Least in High-Income Democracies : The Distribution of Policy-Making Responsibility, Electoral Accountability, and Incentives for Rent Extraction
Why is there significant variation in rent extraction among high-income democracies? A large number of political economy investigations into this research question have found that a long period of democratic rule and high per capita income are asso...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2013/01/17151026/small-beautiful-least-high-income-democracies-distribution-policy-making-responsibility-electoral-accountability-incentives-rent-extraction http://hdl.handle.net/10986/12197 |
| Summary: | Why is there significant variation in
rent extraction among high-income democracies? A large
number of political economy investigations into this
research question have found that a long period of
democratic rule and high per capita income are associated
with less rent extraction among public policy-makers.
However, attempts to explain the residual, yet significant,
variation in rent extraction among countries that possess
both these characteristics have been significantly more
circumspect and disputed. This paper explores how the
distribution of policy-making responsibilities between
electorally accountable decision-makers and their
electorally unaccountable public policy-making counterparts
determines the optimal level of rents extracted in any given
high-income democracy context. Specifically, the paper
formally models how: (1) variation in the ratio of
electorally accountable decision-makers to electorally
unaccountable decision-makers, by altering (2) voters'
evaluation of incumbent competency, changes (3) the
incentives that policy-makers, wishing to remain in office,
have to minimize their short-term level of rent extraction
in order to signal their competency and hopefully retain
office. Given these "career concerns," the
theoretical model predicts that an increase or decrease in
the ratio will be associated with more or less rent
extraction. This hypothesis is then tested empirically.
Establishing that the ratio does robustly predict variation
in rent extraction is a significant finding, as it can
enable analysts to predict how changes in policy-making
contexts may affect the incentives for good governance in
this sub-set of countries. |
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