Abstract: Economists generally assume that political institutions are inefficient.1 Recently, however, it has been proposed that under competition, political markets are as efficient as economic markets.2 According to this hypothesis, in a democratic state, political competition will tend to eliminate rents, leading to an efficient allocation of public resources. It should be noted that this theory has several important corollaries that may be tested empirically. First, it predicts that voters in democratic states will be indifferent to political boundaries: competition should tend to make resource allocation independent of political institutions. Second, the theory predicts that residents of democratic states will be insensitive to the level of political decentralization: whether a service is supplied by local employees of a central government or by a lower level of jurisdiction,
Publication Year: 1990
Publication Date: 1990-01-01
Language: en
Type: article
Access and Citation
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot