Democracy, state capacity and public finance

Easaw, Joshy Z. ORCID: https://orcid.org/0000-0003-3476-4300 and Leppala, Samuli ORCID: https://orcid.org/0000-0002-1702-0417 2023. Democracy, state capacity and public finance. Economic Inquiry 61 (2) , pp. 301-321. 10.1111/ecin.13115

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Abstract

The paper addresses how democracy can affect public finance and state capacity investment. We show that the effect of democracy on public policy can take two forms: direct and indirect. The direct effect transpires when increasing democracy leads to an increase in public expenditure which results in increased public goods provision and reduced political rent. The indirect effect emerges when increased democracy leads to a reduction in state capacity investment and, subsequently, to a reduction in public goods provision. Paradoxically, lower political rents deteriorate the incumbent's incentive to invest in state capacity, at the expense of public goods provision.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Additional Information:	This paper is jointly authored by J. Z. Easaw and S. Leppala.
Publisher:	Wiley
ISSN:	0095-2583
Date of First Compliant Deposit:	15 July 2022
Date of Acceptance:	1 July 2022
Last Modified:	17 Nov 2023 18:55
URI:	https://orca.cardiff.ac.uk/id/eprint/151324

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