Revisiting the "Decentralization Theorem"--On the role of externalities
AbstractThe "Decentralization Theorem" [Oates, W.E., 1972. Fiscal Federalism. Harcourt Brace Jovanovich, New York] is central to the discussion of fiscal federalism. We revisit the role of consumption spillovers in evaluating the merits of (de)centralization. Unlike the general prediction, a higher degree of spillovers may reduce the difference in utility of centralization and decentralization. The non-monotonicity result relates to the difference in expenditures on public consumption. Provided decentralized choices yield higher levels of public expenditure, a rise in the amount of spillovers allows residents to enjoy larger gains in public consumption (and thereby utility) under decentralization relative to centralization.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Urban Economics.
Volume (Year): 64 (2008)
Issue (Month): 1 (July)
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Web page: http://www.elsevier.com/locate/inca/622905
Federalism Decentralization Theorem Externality Policy uniformity;
Other versions of this item:
- Marko Köthenbürger, 2007. "Revisiting the “Decentralization Theorem” – On the Role of Externalities," CESifo Working Paper Series 2128, CESifo Group Munich.
- H10 - Public Economics - - Structure and Scope of Government - - - General
- H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
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