The decentralization tradeoff for complementary spillovers
AbstractWe examine a symmetric two-district setting with spillovers of local public spending where a spill-in from the foreign spending is not a substitute, but a complement to domestic spending. Specifically, we assume production of two district-specific public goods out of two complementary district-specific inputs. We compare equilibria in non-cooperative decentralization and cooperative centralization for different spillovers, complementarities and cost-division rules, and control for the effects of strategic delegation and the feasibility of voluntary contributions to the input in the foreign district. We find that centralization welfare-dominates decentralization in most institutional settings and for a wide range of parameters, yet we can also identify necessary and sufficient conditions for decentralization to welfare-dominate centralization. The setup features three novelties: In the absence of transfers, welfare in decentralization increases in spillovers, strategic delegation in decentralization improves welfare, and centralized provision may be non-monotonic in spillovers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Springer in its journal Review of Economic Design.
Volume (Year): 16 (2012)
Issue (Month): 1 (March)
Contact details of provider:
Web page: http://link.springer.de/link/service/journals/10058/index.htm
Other versions of this item:
- Martin Gregor & Lenka Šastná, 2011. "The Decentralization Tradeoff for Complementary Spillovers," Working Papers IES 2011/13, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2011.
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
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.:
- Benjamin Lockwood, 2007.
"Voting, Lobbying, and the Decentralization Theorem,"
CESifo Working Paper Series
2117, CESifo Group Munich.
- Ben Lockwood, 2008. "Voting, Lobbying, And The Decentralization Theorem," Economics and Politics, Wiley Blackwell, vol. 20(3), pages 416-431, November.
- Lockwood, Ben, 2007. "Voting, Lobbying, and the Decentralization Theorem," The Warwick Economics Research Paper Series (TWERPS) 798, University of Warwick, Department of Economics.
- Ben Lockwood, 2007. "Voting, Lobbying and the Decentralization Theorem," Economics Working Papers ECO2007/06, European University Institute.
- Cornes, Richard & Hartley, Roger, 2007.
"Weak links, good shots and other public good games: Building on BBV,"
Journal of Public Economics,
Elsevier, vol. 91(9), pages 1684-1707, September.
- Richard Cornes & Roger Hartley, . "Weak Links, Good Shots And Other Public Good Games: Building On Bbv," Discussion Papers 06/09, University of Nottingham, School of Economics.
- Richard Cornes & Roger Hartley, 2006. "Weak Links, Good Shots and other PublicGood Games: Building on BBV," The School of Economics Discussion Paper Series 0624, Economics, The University of Manchester.
- Michele Ruta, 2010. "Lobbying and (de)centralization," Public Choice, Springer, vol. 144(1), pages 275-291, July.
- Bergstrom, Theodore C & Cornes, Richard C, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," Econometrica, Econometric Society, vol. 51(6), pages 1753-65, November.
- Francis Bloch & Unal Zenginobuz, 2007.
"The effect of spillovers on the provision of local public goods,"
Review of Economic Design,
Springer, vol. 11(3), pages 199-216, November.
- Bloch, Francis & Zenginobuz, Unal, 2004. "The Effect of Spillovers on the Provision of Local Public Goods," MPRA Paper 186, University Library of Munich, Germany, revised 05 Oct 2006.
- Feidler, Janos & Staal, Klaas, 2008. "Centralized and decentralized provision of public goods," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 241, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Cheikbossian, Guillaume, 2008. "Rent-seeking, spillovers and the benefits of decentralization," Journal of Urban Economics, Elsevier, vol. 63(1), pages 217-228, January.
- Roelfsema, Hein, 2007.
"Strategic delegation of environmental policy making,"
Journal of Environmental Economics and Management,
Elsevier, vol. 53(2), pages 270-275, March.
- H.J. Roelfsema, 2004. "Strategic Delegation of Environmental Policy Making," Working Papers 04-11, Utrecht School of Economics.
- Levaggi, Rosella, 2010.
"From local to global public goods: How should externalities be represented?,"
Elsevier, vol. 27(5), pages 1040-1042, September.
- Rosella Levaggi, 2009. "From local to global public goods: how should externalities be represented?," Working Papers 0903, University of Brescia, Department of Economics.
- Loeper, Antoine, 2011. "Coordination in heterogeneous federal systems," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 900-912, August.
- Robert A.J. Dur & Hein J. Roelfsema, 2002.
"Why does Centralisation fail to internalise Policy Externalities?,"
Tinbergen Institute Discussion Papers
02-056/3, Tinbergen Institute, revised 11 Nov 2003.
- Robert Dur & Hein Roelfsema, 2005. "Why does centralisation fail to internalise policy externalities?," Public Choice, Springer, vol. 122(3), pages 395-416, March.
- R Dur & H.J. Roelfsema, 2004. "Why does centralisation fail to internalise policy externalities?," Working Papers 04-09, Utrecht School of Economics.
- Giuranno, Michele G., 2010. "Pooling sovereignty under the subsidiary principle," European Journal of Political Economy, Elsevier, vol. 26(1), pages 125-136, March.
- Marko Köthenbürger, 2007.
"Revisiting the “Decentralization Theorem” – On the Role of Externalities,"
CESifo Working Paper Series
2128, CESifo Group Munich.
- Koethenbuerger, Marko, 2008. "Revisiting the "Decentralization Theorem"--On the role of externalities," Journal of Urban Economics, Elsevier, vol. 64(1), pages 116-122, July.
- Debraj Ray & Jean-Marie Baland & Olivier Dagnelie, 2007.
"Inequality and Inefficiency in Joint Projects,"
Royal Economic Society, vol. 117(522), pages 922-935, 07.
- Loeper, Antoine, 2011. "Coordination in heterogeneous federal systems," Journal of Public Economics, Elsevier, vol. 95(7), pages 900-912.
- Bård Harstad, 2007. "Harmonization and Side Payments in Political Cooperation," American Economic Review, American Economic Association, vol. 97(3), pages 871-889, June.
- Vicary, Simon & Sandler, Todd, 2002. "Weakest-link public goods: Giving in-kind or transferring money," European Economic Review, Elsevier, vol. 46(8), pages 1501-1520, September.
- Martin Gregor, 2011. "Tradeoffs of foreign assistance for the weakest-link global public goods," International Tax and Public Finance, Springer, vol. 18(2), pages 233-251, April.
- Segendorff, Bjorn, 1998. "Delegation and Threat in Bargaining," Games and Economic Behavior, Elsevier, vol. 23(2), pages 266-283, May.
- Jan Schnellenbach & Lars Feld & Christoph schaltegger, 2007.
"The Impact of Referendums on the Centralisation of Public Goods Provision: A Political Economy Approach,"
0440, University of Heidelberg, Department of Economics, revised May 2007.
- Jan Schnellenbach & Lars Feld & Christoph Schaltegger, 2010. "The impact of referendums on the centralisation of public goods provision: a political economy approach," Economics of Governance, Springer, vol. 11(1), pages 3-26, February.
- Jan Schnellenbach & Lars P. Feld & Christoph A. Schaltegger, 2006. "The Impact of Referendums on the Centralisation of Public Goods Provision: A Political Economy Approach," CESifo Working Paper Series 1803, CESifo Group Munich.
- Cheikbossian, Guillaume, 2008. "Rent-seeking, Spillovers and the Benefits of Decentralization," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Martin Gregor, 2012. "Modeling positive inter-jurisdictional public spending spillovers," Working Papers IES 2012/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2012.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F Baum).
If references are entirely missing, you can add them using this form.