Essays on the Political Economy of Decentralization By Ed Gareth Poole A thesis submitted to the Department of Government of the London School of Economics and Political Science for the degree of Doctor of Philosophy London, England July 2017 Declaration I certify that the thesis I have presented for examination for the MPhil/PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without my prior written consent. I warrant that this authorization does not, to the best of my belief, infringe the rights of any third party. I declare that my thesis consists of 64,174 words. 2 Abstract This thesis consists of three papers that make a distinctive contribution to the study of decentralization in the areas of fiscal policy, legislative behavior and government responsiveness. The first paper revisits theories of substate tax policy that usually draw on evidence from stable federations. Investigating fiscal decentralization reforms in four European countries subject to intense center-periphery territorial competition, I find that incentives operating in such systems generate a paradox whereby prominent autonomist regions are among the least likely to make proactive changes after decentralization. I theorize this as the best response to central government attempts at blame-shifting by locking regions into making controversial policy changes. The frequent alignment of autonomist parties as ‘catch-all’ parties buttresses incentives to avoid tax innovation. The second paper picks up these themes of institutional constraints and electoral incentives faced by political actors. Addressing a frequently confounding question in the field, I exploit the unusual treatment of dual candidacy in the UK’s devolved legislatures to examine whether mixed-member electoral systems influence the legislative behavior of reelection-seeking politicians and uncover a split finding. Although there is some evidence that status as a list or constituency member influences members’ assignments, other connections to members’ presumed re- 3 election interests are not found. I contend that the influence of electoral rules is conditioned by contextual factors including re-selection procedures, chamber size and strong parties. Building on insights from the first paper, the third paper empirically scrutinizes expectations from fiscal federalism theory that lower tiers of government should be more responsive to citizens. Using the responses from two waves of FOI requests emailed to 812 public bodies, I develop objective measures of timeliness and quality which identify significant variations in responsiveness across the tiers and territories of the UK. I argue that the theoretical foundations of traditional fiscal federalism theory are inadequate because they ignore institutions’ cultural underpinnings, capacity constraints and principal-agent relationships shaping public officials’ behavior. 4 Acknowledgments I would like to gratefully acknowledge the financial support of the London School of Economics’ PhD studentships scheme. Given the death of my father soon after starting the PhD program, my ability to finish this thesis is thanks to all the exceptional people I had the pleasure of meeting and working with at the London School of Economics and Cardiff University. I am grateful for the support of my supervisor, colleagues, friends and two brothers, without whose support I could not have completed this thesis. My supervisor, Dr. Joachim Wehner, inspired me to explore decentralization in new and inventive ways, connected me with new colleagues and institutions, and encouraged me to take up new methodological practices in the field. My mother Anne was both a terrific springboard for new ideas and an unconditionally supportive mum and listener. I wrote this thesis in Cardiff, Wales, at the Wales Governance Centre at Cardiff University, first as a visiting student immediately after completing my MRes at LSE, and subsequently as a lecturer on Cardiff’s academic staff. The theoretical underpinnings for this thesis benefitted enormously from lengthy discussions with my research mentor at Cardiff, Professor Richard Wyn Jones. I am grateful for his valuable insights and the huge amount of time he dedicated to advising me on my work. I’m also grateful to Cardiff Politics’ department heads like Dr. Branwen 5 Gruffydd Jones and Professor Peter Sutch for giving me the space and encouragement vital in allowing me to submit my thesis in 2016-17. I’ve had the privilege of studying alongside two cohorts of newly-qualified academics and doctoral students at LSE and Cardiff. In London, Robert van Geffen, Marta Wojciechowska, Ellie Knott, Carolyn Armstrong and Kathleen Henehan were immensely supportive throughout my PhD and made the Government Department’s PhD lab 421 a hugely enjoyable place to visit. Having your best friends finish their thesis is certainly a powerful motivator to complete your own! In Cardiff, the staff and students of the Wales Governance Centre at 21 Park Place and the Pierhead Building in Cardiff Bay: Nye Davies, Alena Drieschova, Adam Evans, Steffan Evans, Manon George, Guto Ifan, Rob Jones, Jac Larner, Laura McAllister, Rachel Minto, Huw Pritchard, Roger Scully, and Lleu Williams. And for friends like Jamie Matthews, Luke Nicholas and Matthew Ford for being supportive whenever I wanted an excuse for doing something more grounded (and productive?!) than this thesis. Finally, I’m grateful for the staff at Cwmbrân library where I spent many hours compiling databases and writing up findings. For chapter 4, I would like to thank Joachim Wehner, Chris Gilson, Patrick Dunleavy, Richard Wyn Jones, Alena Drieschova, Rebecca Rumbul and Adam Evans in particular for their helpful comments and suggestions. 6 Dedicated to my dad, Professor Michael John Findlay Poole Cardiff University (1943-2012) 7 Contents Abstract ............................................................................................................................ 3 Acknowledgements ......................................................................................................... 5 List of Tables .................................................................................................................. 11 List of Figures................................................................................................................. 13 1 Introduction ........................................................................................................... 14 1.1 A ‘Decentralization Dividend’? Claims and Counterclaims from Decentralization Theory ....................................................................................... 20 1.2 Political Economy and New Institutionalist Perspectives in the Study of Decentralization ..................................................................................................... 25 1.3 Unifying Themes Arising in this Thesis ......................................................... 30 1.4 Methodological and Data Contributions ........................................................ 39 1.5 Western Europe as a Venue for Empirical Tests of Theories of Decentralization ..................................................................................................... 41 1.6 Overview .......................................................................................................... 43 2 The Paradox of Fiscal Decentralization: Why Autonomist Regions Don’t Make More Use of Devolved Tax Powers ........................................................................... 45 2.1 Introduction ..................................................................................................... 47 2.2 Stable Federations as an Unstable Foundation in Understanding the Differentiated Use of Tax Powers ......................................................................... 49 2.3 Adding the Centre Back: Competition and Decentralized Income Tax ....... 55 2.4 Charting the Paradox: The Use of Income Tax in Spain, Italy, Belgium and the UK .................................................................................................................... 66 2.4.1 Spain .................................................................................................... 67 2.4.1 Italy ..................................................................................................... 76 2.4.1 Belgium ............................................................................................... 86 2.4.1 The United Kingdom (Scotland) ........................................................ 88 2.5 Income Tax Decentralization as an Equilibrium Institution? ....................... 91 8 3 An Electoral Calculus? Dual Incentives and Committee Assignment in the UK's Mixed-Member Legislatures ...................................................................................... 95 3.1 Introduction .................................................................................................... 96 3.2 Electoral Incentives from Theory to Evidence .............................................. 99 3.3 Testing Electoral Incentives in Wales and Scotland ...................................