Income and Preferences for Centralization of Authority

Post developed by Catherine Allen-West in coordination with Diogo Ferrari

DiogoFerrari

Diogo Ferrari, PhD Candidate, University of Michigan, Ann Arbor

ICYMI (In Case You Missed It), the following work was presented at the 2016 Annual Meeting of the American Political Science Association (APSA).  The presentation, titled “The Indirect Effect of Income on Preferences for Centralization of Authority,” was a part of the session “Devolution, Fragmented Power, and Electoral Accountability” on Thursday September 1, 2016.

One of the primary activities of any elected government is to decide how to allocate public funds for policies like health care and education. In countries that adopted a federal system – like the United States, Canada, Australia, Germany, and others – the central government usually has some policies that promotes distribution of fiscal resources among different jurisdictions, like among states or cities. Take Australia for example. The federal government collects taxes that are funneled to local governments  in accordance with their needs. This diminishes the inequality between different Australian sub-national governments in their capacity to invest and provide public services. Brazil is another example. Brazil has a huge federal program that transfers resources from rich to poor states and whose goal is to reduce regional inequality. These federal governments can only continue to operate in this way, that is, promoting interregional redistribution, if the power to control fiscal resources is centralized.  Therefore, there is a connection between interregional redistribution and centralization of authority.

Now, voters have different preferences about how the government should spend the fiscal resources. They have different opinions, for instance, to which degree taxes collected in one region should be invested in another region. Do voters that support interregional redistribution also prefer that the fiscal authority is concentrated in the hands of the federal government as opposed to the sub-national ones? Which characteristics determine the preference of voters regarding interregional redistribution and centralization of authority? How those preferences are connected?

To investigate these fiscal intricacies further, Diogo Ferrari, PhD Student of Political Science at the University of Michigan and collaborator in the Center for Political Studies, used data from an original survey conducted in Brazil and financed by the Center of Metropolitan Studies (CEM) in collaboration with Marta Arretche, Professor of Political Science at the University of Sao Paulo, and Rogerio Schlegel, professor of Political Science at the Federal University of Sao Paulo. The results show how income, regional inequality, and voters’ support for redistributive policies and for allocation of political power in multi-tier polities are connected.

Specifically, the research shows that individuals’ income is negatively associated with their support for interregional redistribution. So, the less money one makes, the more likely they are to support redistributing wealth between regions. Using mediation analysis, the researchers found an indirect effect of income on preferences for centralization of authority.  That is, those citizens that make more money prefer less centralization of power because they are less supportive to regional redistribution.

The paper also shows that there is a direct effect of income on preferences for centralized authority, but that depends on the inequality within one’s own region relative to country-wide inequality. Essentially, rich individuals prefer a less centralized government only if the inequality within their region is relatively low.

The paper provides empirical evidence in favor of some arguments in the Political Economy of redistribution and against a long-standing intuition about preferences for allocation of authority, namely, that individuals living in rich regions tend to oppose centralized designs in order to avoid becoming a net fiscal contributor of fiscal resources to other regions.

Read the full paper here: https://dioferrari.files.wordpress.com/2016/09/paper-apsa-2016-pref.pdf

 

Leave a Reply

Your email address will not be published. Required fields are marked *