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On the endogenous allocation of decision powers in federal structures

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  • Lorz, Oliver
  • Willmann, Gerald

Abstract

This paper provides a political-economy explanation of the degree of centralization in economic policy making. To determine which policies are to be centralized, regions select representatives who then negotiate the degree of centralization and the regional cost shares of centrally decided policies. We show that the resulting degree of centralization is suboptimally low. Voters strategically delegate to representatives who are averse to public spending and hence prefer decentralized decisions in order to reduce their region's cost share. When spillovers are asymmetric, strategic delegation is stronger at the periphery than at the center. --

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 57 (2005)
Issue (Month): 2 (March)
Pages: 242-257

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Handle: RePEc:eee:juecon:v:57:y:2005:i:2:p:242-257

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Web page: http://www.elsevier.com/locate/inca/622905

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Cited by:
  1. Giovanni Facchini & Oliver Lorz & Gerald Willmann, 2005. "Asylum Seekers in Europe: The Warm Glow of a Hot Potato," Development Working Papers, Centro Studi Luca d\'Agliano, University of Milano 205, Centro Studi Luca d\'Agliano, University of Milano.
  2. Barbara Dluhosch & Nikolai Ziegler, 2011. "The paradox of weakness in the politics of trade integration," Constitutional Political Economy, Springer, Springer, vol. 22(4), pages 325-354, December.
  3. Feng Xie & David Levinson, 2009. "Governance choice on a serial network," Working Papers, University of Minnesota: Nexus Research Group 200904, University of Minnesota: Nexus Research Group.
  4. Oliver Lorz & Gerald Willmann, 2013. "Size versus scope: on the trade-off facing economic unions," International Tax and Public Finance, Springer, Springer, vol. 20(2), pages 247-267, April.
  5. Oliver Lorz & Gerald Willmann, 2008. "Enlargement versus Deepening: The Trade-off Facing Economic Unions," CESifo Working Paper Series, CESifo Group Munich 2455, CESifo Group Munich.
  6. Brueckner, Jan K., 2009. "Partial fiscal decentralization," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(1), pages 23-32, January.
  7. Lisa Grazzini & Alessandro Petretto, 2013. "Federalism with Bicameralism," Working Papers - Economics, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa wp2013_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  8. Jan Schnellenbach & Lars Feld & Christoph schaltegger, 2007. "The Impact of Referendums on the Centralisation of Public Goods Provision: A Political Economy Approach," Working Papers, University of Heidelberg, Department of Economics 0440, University of Heidelberg, Department of Economics, revised May 2007.
  9. Federico Etro, 2006. "Political geography," Public Choice, Springer, Springer, vol. 127(3), pages 321-343, June.
  10. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
    [ENDOGENOUS BOUNDARIES AND DISTRIBUTION O
    ," MPRA Paper 16473, University Library of Munich, Germany.
  11. Borge, Lars-Erik & Brueckner, Jan K. & Rattsø, Jorn, 2014. "Partial fiscal decentralization and demand responsiveness of the local public sector: Theory and evidence from Norway," Journal of Urban Economics, Elsevier, Elsevier, vol. 80(C), pages 153-163.
  12. Federico Etro, 2004. "The Political Economy of Fiscal and Monetary Unions," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(3-4), pages 289-328, December.
  13. Janos Feidler & Klaas Staal, 2012. "Centralized and decentralized provision of public goods," Economics of Governance, Springer, Springer, vol. 13(1), pages 73-93, March.

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