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The Effects of Regional Sizing on Growth

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  • Santiago Lago-Peñas
  • Bruno Ventelou

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Abstract

In this paper, a micro-founded model dealing with the effects of regional sizing on economic growth is developed. Departing from bigger sizes, reduction involves more efficient public choices because of proximity to individual preferences and needs, but also creates the risk of underestimation of the real profitability of public expenditure by local governments due to cross border spillovers and “predator” behaviors. Hence the optimal size depends on the relative strength of both effects. Moreover, we show that different institutional arrangements between fiscal tiers involve different results for each possible size. Using data from the Spanish regions during the period 1984–1996, the relationship between productive spending and jurisdiction size is then analyzed. Copyright Springer Science+Business Media, Inc. 2006

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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 127 (2006)
Issue (Month): 3 (June)
Pages: 407-427

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Handle: RePEc:kap:pubcho:v:127:y:2006:i:3:p:407-427

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Web page: http://www.springerlink.com/link.asp?id=100332

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  1. Alberto Alesina & Enrico Spolaore, 1995. "On the Number and Size of Nations," NBER Working Papers 5050, National Bureau of Economic Research, Inc.
  2. Bruno VENTELOU, 2000. "Fédéralisme optimal en présence de gouvernements prédateurs," Discussion Papers (REL - Recherches Economiques de Louvain) 2000027, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  3. Danyang Xie & Heng-fu Zou & Hamid Davoodi, 1999. "Fiscal Decentralization and Economic Growth in the United States," CEMA Working Papers 109, China Economics and Management Academy, Central University of Finance and Economics.
  4. Agell, Jonas & Lindh, Thomas & Ohlsson, Henry, 1997. "Growth and the public sector: A critical review essay," European Journal of Political Economy, Elsevier, vol. 13(1), pages 33-52, February.
  5. Grossman, Herschel I. & Noh, Suk Jae, 1994. "Proprietary public finance and economic welfare," Journal of Public Economics, Elsevier, vol. 53(2), pages 187-204, February.
  6. Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
  7. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
  8. Beck, Nathaniel & Katz, Jonathan N. & Alvarez, Michael R. & Garrett, Geoffrey & Lange, Peter, 1993. "Government Partisanship, Labor Organization and Macroeconomic Performance: A Corrigendum," Working Papers 848, California Institute of Technology, Division of the Humanities and Social Sciences.
  9. David Alan Aschauer, 1988. "Government spending and the "falling rate of profit."," Economic Perspectives, Federal Reserve Bank of Chicago, issue May, pages 11-17.
  10. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
  11. Ventelou, Bruno, 2002. " Corruption in a Model of Growth: Political Reputation, Competition and Shocks," Public Choice, Springer, vol. 110(1-2), pages 23-40, January.
  12. Winer, Stanley L, 1983. "Some Evidence on the Effect of the Separation of Spending and Taxing Decisions," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 126-40, February.
  13. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  14. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
  15. Santiago Lago Peñas, 2001. "La Dinámica De Los Gastos De Capital En Las Comunidades Autónomas: Un Análisis De Sus Determinantes," Hacienda Pública Española, IEF, vol. 157(2), June.
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Cited by:
  1. Beckmann, Rainer, 2007. "Profitability of Western European banking systems: panel evidence on structural and cyclical determinants," Discussion Paper Series 2: Banking and Financial Studies 2007,17, Deutsche Bundesbank, Research Centre.

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