Intergovernmental transfers and re-election concerned politicians

This paper provides a non-partisan rationale for intergovernmental transfers: transfers are generated by electoral dynamics and term limits. We formally study re-election concerned politicians in a federal setting with term limits. The theory presented highlights an important aspect of federalism, that voters participate in elections for office holders at multiple levels of government. We augment a standard model of political career concerns to allow for multilevel governance, and to provide a central office holder with the ability to make transfers to a local politician. We find that when elections are staggered, an equilibrium exists with positive transfers. These transfers are made to sabotage political challengers. These transfers are non-partisan and are an artifact of the electoral dynamics as generated by the electoral calendar and politicians' career concerns. We test the implications of the theory using data on transfer receipts of U.S. governors, confirming the importance of election timing and term limits as determinants of transfers.