A simple dynamic decentralized leadership model with private savings and local borrowing regulation
AbstractThis paper considers a simple dynamic decentralized leadership model with local borrowing and regional productivity-enhancing investment. In this model, the central government is benevolent but cannot commit to ex post intergovernmental transfer policies, while local governments act strategically after accounting for the ex post motives of the central government. We then investigate inefficiency in the subgame perfect equilibrium. We analyze the effect of central control on local borrowing and show that central control is of no benefit because ex ante local taxation works to offset it. We find the model yields different policy implications that central control is effective when extended to the case of residential mobility.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Urban Economics.
Volume (Year): 70 (2011)
Issue (Month): 1 (July)
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Web page: http://www.elsevier.com/locate/inca/622905
Commitment Intergovernmental transfers Local borrowing Private savings Residential mobility;
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