About Dixit and Londregan (1998)
Fiscal federalism and redistributive politics:
The Essay of Avinash and Londregan treats the redistributive politics between central level of government and local (the level of the states in a federal goverance structure) level. They compared the success of fiscal federalism in unitary and federal systems.
The success of fiscal federalism depends in a federal system of the interaction between the various levels and the outcome of such interaction. If, in a unitary system, there were no local governments to intermediate, the interaction would be between the central political party.
Redistribution politics has an ideological (egilitarian) dimension as well as a tactical one (electoral), but the most important one is the tactical dimension. Governments are either social - welfare maximizers- or reflect the preferences of the median voter and parties bid for the support of swing voters.
The underlying model of redistribution:
Two parties (L and R) competing for the votes of several groups and Ng being the number of people in group g for g = 1, 2,….G. The total number of people is irrelevant, more important is to get the separate groups for its politics. There would be a critical level, called the cutpoint, between the decisions to vote for one of these two parties. So both parties propose a different redistributive policy to the voters who are voting tactically. Groups that have relatively high density at the cutpoint are favored. Voters who have a strong ideological attachment to a party aren’t considered for the party calculus.
The role of economical transfers
In equilibrium, without informational advantages, both parties will promis the same economical transfers to each group of voters. The decision of the individual is a trade – off between its economic advantages (which both parties have promised) and the ideological position of each political party. In a federal system (with a divided government) the role of the economic transfer is less important and there is a better balance on the ideological position issue. The decision to vote for a party depends in a federal system on the ideological position and is less tactically. But the people calculate the consequence of the election in the central level for their local policy.
The model of Dixit and Londregan is a different explanation in comparison with the model of the median voter, which is more fixed about the central level. The model shows the effect of two dimensions, central and local dimension, and the influence of economic transfers in the policy process.
It was interesting to read this essay about redistribution politics and fiscal federalism but it was difficult to get all this stuff (information) in a short essay.