Regional Disparities and Government Quality: Redistributive Conflict Crowds Out Good Government

Abstract

In this paper, we argue and provide empirical evidence to support the claim that higher income differences across regions increase the salience of interregional redistribution and, as a result, crowd out policies aiming towards improvements in government quality or efficiency. In the presence of greater regional disparities, the balance of politics may tilt towards redistributive concerns and away from government efficiency considerations, especially since the latter can be opposed by organized public sector interest groups. Our empirical analysis, based on a sample of 22 Organization for Economic Co-operation and Development (OECD) countries over the period from the mid-1990s to 2005, supports our basic intuition that regional disparities may lead to territorially based redistributive conflict to the detriment of government quality.