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Constitutional Design and Regional Favoritism

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  • Zantman, Wilfried

Abstract

Using a principal-agent framework, this paper analyzes a public good provision problem in which a central government tries to favor one of the regions for political reasons. We show how this favoritism leads to some distortions of the allocation scheme compared to the benevolent case. We then study the effects of decentralization, modeled here by giving an outside option to the minority region. We exhibit a trade-off between rent and equality and study the allocative and redistributive effects of a decentralized setting. Copyright 2002 by Blackwell Publishing Inc.

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 4 (2002)
Issue (Month): 1 ()
Pages: 71-93

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Handle: RePEc:bla:jpbect:v:4:y:2002:i:1:p:71-93

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Cited by:
  1. Rickman, Neil & Witt, Robert, 2005. "Favouritism and Financial Incentives: A Natural Experiment," CEPR Discussion Papers 4968, C.E.P.R. Discussion Papers.
  2. Florence Lachet-Touya, 2012. "Les interactions fiscales verticales à la lumière de la théorie des multiprincipaux," Recherches économiques de Louvain, De Boeck Université, vol. 78(1), pages 27-46.
  3. Rubinchik-Pessach, Anna, 2005. "Can decentralization be beneficial?," Journal of Public Economics, Elsevier, vol. 89(7), pages 1231-1249, July.

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