Fiscal Illusion and Political Accountability: Theory and Evidence from Two Local Tax Regimes in Britain
Local tax reform in Britain in 1993 (reinstating a propertytax) may have reversed some intended fiscal illusion reducing,and ``accountability'' improving, features of the poll tax(itself a reform introduced in 1990 with the specific aim ofpromoting accountability). We formalize these features withina median voter model of the demand for local publicexpenditure that distinguishes between accountability andfiscal illusion effects. The model shows that a prioriaccountability effects on expenditures are ambiguous.Available data for England and Wales are used to test themodel. We find strong evidence of grant illusion (the flypapereffect), similar across tax regimes, with evidence of renterillusion and of less accountability under the property tax.The degree of local income inequality appears to affectexpenditure levels only with the property tax.
The purpose of the model presented by Glance et al is to study the ‘contribute vs. free-ride’ dilemma present in organizations. This social dilemma is present on two intertwined levels, the managerial front and the base level of workers. This model also seeks to define a correlation (if one does exist) between worker turnover and productivity rates.