Fiscal Consequences of Electoral Institutions

Abstract

There are more than 500,000 elected officials in the United States, 96 percent of whom serve in local governments. Electoral density - the number of elected officials per capita or per governmental unit - varies greatly from place to place. The most electorally dense county has more than 20 times the average number of elected officials per capita. In this paper, we offer the first systematic investigation of the link between electoral density and fiscal policy. Drawing on principal-agent theories of representation, we argue that electoral density presents a tradeoff between accountability and monitoring costs. Increasing the number of specialized elected offices promotes issue unbundling, reducing slack between citizen preferences and government policy; but the costs of monitoring a larger number of officials may offset these benefits, producing greater latitude for politicians to pursue their own goals at the expense of citizen interests. Thus, we predict diminishing returns to electoral density, suggesting a U-shaped relationship between the number of local officials and government fidelity to citizen preferences. Using a county-level dataset of all elected officials in the United States, we evaluate this theory along with competing theories from the existing literature. Empirically, we find evidence that public sector size decreases with electoral density up to a point, beyond which budgets grow as more officials are added within a community.