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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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File URL: http://hdl.handle.net/10.1007/s11127-005-9001-0
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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. Hamid Davoodi & Heng-fu Zou, 1996. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," CEMA Working Papers 98, China Economics and Management Academy, Central University of Finance and Economics.
  2. Robert J. Barro, 1991. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  3. 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.
  4. 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.
  5. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  6. 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.
  7. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
  8. 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.
  9. 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.
  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. Ohlsson, H. & Agell, J. & Lindh, T., 1995. "Growth and the Public Sector: A Critical Review Essay," Papers 1995-09, Uppsala - Working Paper Series.
  12. David Alan Aschauer, 1988. "Government spending and the "falling rate of profit."," Economic Perspectives, Federal Reserve Bank of Chicago, issue May, pages 11-17.
  13. Xie, Danyang & Zou, Heng-fu & Davoodi, Hamid, 1999. "Fiscal Decentralization and Economic Growth in the United States," Journal of Urban Economics, Elsevier, vol. 45(2), pages 228-239, March.
  14. 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.
  15. 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).
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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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