Voting, Lobbying, And The Decentralization Theorem
AbstractThis paper revisits the well-known fiscal "Decentralization Theorem" by relaxing the role of the assumption that governments are benevolent, while retaining the assumption of policy uniformity. If, instead, decisions are made by majority voting, the theorem fails. Specifically, (i) centralization can welfare-dominate decentralization even if there are no externalities and regions are heterogeneous and (ii) decentralization can welfare-dominate centralization even if there are positive externalities and regions are homogeneous. Similar results are obtained if a benevolent government is subject to lobbying. Hence, the Decentralization Theorem is not robust to relatively minor deviations away from the benchmark of a purely benevolent government. Copyright 2008 The Author. Journal compilation 2008 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Economics & Politics.
Volume (Year): 20 (2008)
Issue (Month): 3 (November)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0954-1985
Other versions of this item:
- Lockwood, Ben, 2007. "Voting, Lobbying, and the Decentralization Theorem," The Warwick Economics Research Paper Series (TWERPS) 798, University of Warwick, Department of Economics.
- Ben Lockwood, 2007. "Voting, Lobbying and the Decentralization Theorem," Economics Working Papers ECO2007/06, European University Institute.
- Benjamin Lockwood, 2007. "Voting, Lobbying, and the Decentralization Theorem," CESifo Working Paper Series 2117, CESifo Group Munich.
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
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