Election goals and income redistribution: Recent evidence from Albania

This paper examines the impact of political competition on block grants from federal to sub-federal levels of government. We model the extent and direction of income redistribution as determined proximately by the political agendas of central decision makers and, at a deeper level, by the institutions within which they find themselves operating. We contrast two political objective functions that yield different empirical predictions of the ways in which politics should affect fiscal policy. Lessons learned here may prove important in understanding limits on the types of redistribution possible via block grants, given the institutional framework, in both developing and developed countries. (C) 2001 Elsevier Science B.V. All rights reserved. JEL classification: H1; H7; O1.