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Administrative Federalism and a Central Government with Regionally Based Preferences

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  • Robert Schwager
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    Abstract

    Administrative federalism is defined as a constitution where the central state sets quality standards for public projects, and the local jurisdictions decide which projects are to be carried out. Decentralized decisions are inefficient because of an interjurisdictional spillover. A centralized decision is inefficient because the center favors one region and is restricted to distortionary instruments when redistributing between regions. For intermediate values of the spillover, it is shown that administrative federalism leads to a higher welfare than both centralization and decentralization. Moreover, because jurisdictions fear to be exploited, they only join a federation whose constitution is administrative federalism but not one with a fully centralized constitution. Copyright Kluwer Academic Publishers 1999

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    File URL: http://hdl.handle.net/10.1023/A:1008799614576
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    Bibliographic Info

    Article provided by Springer in its journal International Tax and Public Finance.

    Volume (Year): 6 (1999)
    Issue (Month): 2 (May)
    Pages: 165-189

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    Handle: RePEc:kap:itaxpf:v:6:y:1999:i:2:p:165-189

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    Web page: http://www.springerlink.com/link.asp?id=102915

    Related research

    Keywords: federalism; constitution; decentralization;

    References

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    1. Seabright, Paul, 1996. "Accountability and decentralisation in government: An incomplete contracts model," European Economic Review, Elsevier, vol. 40(1), pages 61-89, January.
    2. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
    3. Eichberger, Jurgen & Pethig, Rudiger, 1994. "Constitutional choice of rules," European Journal of Political Economy, Elsevier, vol. 10(2), pages 311-337, July.
    4. Homburg, Stefan, 1997. "Ursachen und Wirkungen eines zwischenstaatlichen Finanzausgleichs," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 61-95.
    5. Tirole, J., 1993. "The Internal Organization of Government," Working papers 93-11, Massachusetts Institute of Technology (MIT), Department of Economics.
    6. Vaubel, Roland, 1994. "The public choice analysis of European integration: A survey," European Journal of Political Economy, Elsevier, vol. 10(1), pages 227-249, May.
    7. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 979-1009, October.
    8. Martimort, David, 1996. "The multiprincipal nature of government," European Economic Review, Elsevier, vol. 40(3-5), pages 673-685, April.
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    Cited by:
    1. Jan K. Brueckner, 2007. "Partial Fiscal Decentralization," CESifo Working Paper Series 2137, CESifo Group Munich.
    2. Kimiko Terai, 2008. "Interregional Disparities in Productivity and the Choice of Fiscal Regime," Working Papers 070813, University of California-Irvine, Department of Economics.
    3. Lars-Erik Borge & Jan K. Brueckner & Jorn Rattso, 2012. "Partial Fiscal Decentralization and Public-Sector Heterogeneity: Theory and Evidence from Norway," CESifo Working Paper Series 3954, CESifo Group Munich.
    4. Torsten Schmidt, 2003. "Institutionelle Bedingungen eines Wettbewerbsföderalismus in Deutschland: Transaktionskosten stärker berücksichtigen," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(3), pages 458-471.

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