The vertical logic of party competition in federal systems

Party competition impedes local service delivery when parties collude. This article argues that the type of competition matters more than its mere intensity. Vertical competition – between national and regional parties – constrains collusion and improves service delivery, whereas competition confined to either national or regional parties is unlikely to generate similar effects. Using a state–year panel for Indian states (2004–2021), the article finds that more verticalised party systems are associated with 2–3 percent higher education spending per person. The implication is that decentralisation can be effective when party systems are structured to deter collusive incentives.