Strategic Incentives in Unconventional Electoral Systems: Introduction to the Special Issue

The study of strategic behaviour and the impact of institutions on elections has mainly focused on simple and conventional electoral systems: list-proportional electoral systems (PR) and the plurality vote. Less conventional systems are not on the agenda of comparative studies, even though no less than 30% of countries use unconventional electoral systems for their national parliamentary elections, such as the Single Transferable Vote, PR with majority bonuses, or mixed electoral systems. Often, they provide for unusual combinations of different institutional incentives, and hence to particular actor strategies.

Fiscal Federalism and Tax Equalization: The potential for progressive local taxes

We construct an empirically informed computational model of fiscal federalism, testing whether horizontal or vertical equalization can solve the fiscal externality problem in an environment in which heterogeneous agents can move and vote. The model expands on the literature by considering the case of progressive local taxation. Although the consequences of progressive taxation under fiscal federalism are well understood, they have not been studied in a context with tax equalization, despite widespread implementation. The model also expands on the literature by comparing the standard median voter model with a realistic alternative voting mechanism. We find that fiscal federalism with progressive taxation naturally leads to segregation as well as inefficient and inequitable public goods provision while the alternative voting mechanism generates more efficient, though less equitable, public goods provision. Equalization policy, under both types of voting, is largely undermined by micro-actors' choices. For this reason, the model also does not find the anticipated effects of vertical equalization discouraging public goods spending among wealthy jurisdictions and horizontal encouraging it among poor jurisdictions. Finally, we identify two optimal scenarios, superior to both complete centralization and complete devolution. These scenarios are not only Pareto optimal, but also conform to a Rawlsian view of justice, offering the best possible outcome for the worst-off. Despite offering the best possible outcomes, both scenarios still entail significant economic segregation and inequitable public goods provision. Under the optimal scenarios agents shift the bulk of revenue collection to the federal government, with few jurisdictions maintaining a small local tax.

Disciplining Investment Incentives: A Lost Cause?

An E15 Initiative think piece: Investment incentives rank among the most important policy instruments governments employ to influence the locational decisions of multinational firms. In the wake of the recent increase in locational competition and the growing impact of investment incentives and support measures for state-owned enterprises (SOEs), the need for enhanced disciplines on investment incentives has gained political and academic salience. This think piece explores the evolution of investment incentives from a development and rule-making perspective. It summarises the existing literature and examines current practices and recent trends in FDI flows and the use of various investment incentives. This is followed by a discussion of the reasons for the observed stalemate in attempts at disciplinary rule-making. The paper concludes by putting forth recommendations for data gathering and transparency that could further the move toward improved global governance founded on the increasing complementarities of trade, investment, and competition law and policy as the core pillars of a more open, inclusive, and just world economy.