Electoral accountability in a country with two-tiered government

In democracies, elections are the primary mechanism for making politicians act in voters’ interests, but voters are unable to prevent that some resources are diverted to political rents. With two levels of government, the rents are reduced if voters require higher bene…cial public expenditures for reelecting incumbents. Voters can also strengthen their power by holding politicians also liable for decisions made by the other level of government. When the incumbent at one level acts as a Stackelberg leader with respect to the other, there is no risk of this leading to Leviathan policies on the part of the incumbents. Keywords: moral hazard; separation of powers; Stackelberg; transparency; voting theory JEL classi…cation: D72; H00; H77 I am grateful to Thomas Aronsson, Magnus Wikström, two anonymous referees, and participants in a seminar at Umeå University for their helpful comments and suggestions, and to the Swedish Council for Working Life and Social Research for a grant that supported this research. Post-refereeing-version. The final publication i published in Public Choice 148, 531-546, 2011, available at Springer via http://dx.doi.org/ïðòïððØæ ›ïïïîØóðïðóçŒŁîó¤ò Electoral accountability in a country with two-tiered government 1