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Why does centralisation fail to internalise policy externalities?

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Author Info
Robert Dur ()
Hein Roelfsema

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Abstract

We provide an explanation why centralisation of political decision making results in overspending in some policy domains, whereas too low spending persists in others. We study a model in which delegates from jurisdictions bargain over local public goods provision. If all of the costs of public goods are shared through a common budget, policy makers delegate bargaining to ‘public good lovers’, resulting in overprovision of public goods. If a sufficiently large part of the costs can not be shared, underprovision persists because policy makers delegate bargaining to ‘conservatives’. We derive financing rules that eliminate the incentives for strategic delegation. Copyright Springer Science + Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s11127-005-5290-6
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Publisher Info
Article provided by Springer in its journal Public Choice.

Volume (Year): 122 (2005)
Issue (Month): 3 (March)
Pages: 395-416
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Handle: RePEc:kap:pubcho:v:122:y:2005:i:3:p:395-416

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References listed on IDEAS
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  1. Bolton, Patrick & Roland, Gerard, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1057-90, November.
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  2. V. V. Chari & Larry E. Jones & Ramon Marimon, 1997. "The economics of split-ticket voting in representative democracies," Working Papers 582, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  3. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2001. "The Political Economy of International Unions," Harvard Institute of Economic Research Working Papers 1939, Harvard - Institute of Economic Research. [Downloadable!]
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  4. Alberto Alesina & Ignazio Angeloni & Ludger Schuknecht, 2001. "What Does the European Union Do?," Harvard Institute of Economic Research Working Papers 1935, Harvard - Institute of Economic Research. [Downloadable!]
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  5. Alberto Alesina & Romain Wacziarg, 1999. "Is Europe Going Too Far?," NBER Working Papers 6883, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Matthias Brueckner, 2000. "Unanimity Versus Consensus Bargaining Games: Strategic Delegation and Social Optimality," Econometric Society World Congress 2000 Contributed Papers 1106, Econometric Society. [Downloadable!]
  7. Persson, Torsten & Tabellini, Guido, 1997. "Political Economics and Macroeconomic Policy," CEPR Discussion Papers 1759, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December. [Downloadable!] (restricted)
  9. DelRossi, Alison F. & Inman, Robert P., 1999. "Changing the price of pork: the impact of local cost sharing on legislators' demands for distributive public goods," Journal of Public Economics, Elsevier, vol. 71(2), pages 247-273, February. [Downloadable!] (restricted)
  10. Persson, Torsten & Tabellini, Guido, 1994. "Does centralization increase the size of government?," European Economic Review, Elsevier, vol. 38(3-4), pages 765-773, April. [Downloadable!] (restricted)
  11. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2001. "Institutional Rules for Federations," NBER Working Papers 8646, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Segendorff, Björn, 1998. "Delegation of Bargaining and Power," Working Paper Series in Economics and Finance 248, Stockholm School of Economics. [Downloadable!]
  13. Ellingsen, Tore, 1998. "Externalities vs internalities: a model of political integration," Journal of Public Economics, Elsevier, vol. 68(2), pages 251-268, May. [Downloadable!] (restricted)
  14. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1027-56, November.
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  15. Gradstein, Mark, 2000. "The Political Economy of Sustainable Federations," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Feng Xie & David Levinson, 2009. "Governance choice on a serial network," Public Choice, Springer, vol. 141(1), pages 189-212, October. [Downloadable!] (restricted)
  2. Timothy J. Hatton, 2005. "European Asylum Policy," IZA Discussion Papers 1721, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Colin Jennings & Hein Roelfsema, 2004. "Conspicuous Public Goods and Leadership Selection," Working Papers 04-10, Utrecht School of Economics. [Downloadable!]
  4. Robert Dur & Klaas Staal, 2006. "Local Public Good Provision, Municipal Consolidation, and National Transfers," Discussion Papers 86, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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  5. Hein Roelfsema, 2004. "Strategic Delegation of Environmental Policy Making," Working Papers 04-11, Utrecht School of Economics. [Downloadable!]
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  6. Bard Hastad, 2007. "Strategic Delegation and Voting Rules," Discussion Papers 1442, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  7. Colin Jennings & Hein Roelfsema, 2008. "Civil Conflict, Federalism and Strategic Delegation of Leadership," Working Papers 08-03, University of Strathclyde Business School, Department of Economics. [Downloadable!]
  8. Colin Jnnings, 2008. "Intra-Group Competition and Inter-Group Conflict: An Application to Northern Ireland," Working Papers 08-09, University of Strathclyde Business School, Department of Economics. [Downloadable!]
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