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Centralization vs. Decentralization: A Principal-Agent Analysis

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  • MARIANO TOMMASI
  • FEDERICO WEINSCHELBAUM

Abstract

The decision to allocate policy jurisdictions to different levels of government is related to a number of trade-offs between the advantages and disadvantages of centralized versus decentralized provision of public services. A trade-off central to many discussions is that between the internalization of externalities under centralization versus an "accountability" advantage of decentralization. In this paper we formalize this trade-off in the context of a class of principal-agent models known as common agency. Copyright 2007 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): 9 (2007)
Issue (Month): 2 (04)
Pages: 369-389

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Handle: RePEc:bla:jpbect:v:9:y:2007:i:2:p:369-389

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Cited by:
  1. Facundo Albornoz & Antonio Cabrales, 2010. "Fiscal Centralization and the Political Process," Discussion Papers 10-10, Department of Economics, University of Birmingham.
  2. Toke Aidt & Jayasri Dutta, 2010. "Fiscal Federalism and Electoral Accountability," CESifo Working Paper Series 3022, CESifo Group Munich.
  3. John William Hatfield & Gerard Padró i Miquel, 2008. "A Political Economy Theory of Partial Decentralization," NBER Working Papers 14628, National Bureau of Economic Research, Inc.
  4. Mariano Tommasi & Federico Weinschelbaum, 2007. "Principal-Agent Contracts under the Threat of Insurance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(3), pages 379-393, September.
  5. Marcelin Joanis, 2009. "Intertwined Federalism: Accountability Problems under Partial Decentralization," CIRANO Working Papers 2009s-39, CIRANO.
  6. Giampaolo Garzarelli, 2005. "Cognition, Incentives, and Public Governance:Laboratory Federalism from the Organizational Viewpoint," Public Economics 0512013, EconWPA.
  7. Giampaolo Garzarelli, 2005. "Old and New Theories of Fiscal Federalism, Organizational Design Problems, and Tiebout," Public Economics 0509009, EconWPA.
  8. Fabio Fiorillo & Agnese Sacchi, 2012. "The Political Economy of the Standard Level of Services: The Role of Income Distribution," CESifo Working Paper Series 3696, CESifo Group Munich.
  9. Lars P. Feld & Christoph A. Schaltegger & Jan Schnellenbach, 2005. "On Government Centralization and Fiscal Referendums: A Theoretical Model and Evidence from Switzerland," CREMA Working Paper Series 2005-18, Center for Research in Economics, Management and the Arts (CREMA).
  10. Pedro Barros & Xavier Martinez-Giralt, 2009. "Contractual design and PPPs for hospitals: lessons for the Portuguese model," The European Journal of Health Economics, Springer, vol. 10(4), pages 437-453, October.
  11. Wallace Oates, 2005. "Toward A Second-Generation Theory of Fiscal Federalism," International Tax and Public Finance, Springer, vol. 12(4), pages 349-373, August.
  12. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
  13. Feld, Lars P. & Schaltegger, Christoph A. & Schnellenbach, Jan, 2008. "On government centralization and fiscal referendums," European Economic Review, Elsevier, vol. 52(4), pages 611-645, May.
  14. Guccio, Calogero & Pignataro, Giacomo & Rizzo, Ilde, 2009. "The performance of local government in the execution of public works," MPRA Paper 16094, University Library of Munich, Germany.

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