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Decentralization and the Fate of Minorities

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  • Kjetil Bjorvatn
  • Alexander W. Cappelen

Abstract

This paper analyses the welfare effects of a change from centralized to decentralized political authority. The potential disadvantage with decentralization in our model is that local dominant groups with rather “extreme” preferences may win the vote and implement policies that harm the well-being of local minorities. When the national median voter represents a “moderate” position, centralization can be seen as a way of protecting the interests of local minorities. Our main result is that the centralized solution may welfare dominate decentralization even in the absence of scale economics and interregional spillovers. We also demonstrate that increased segregation, increased mobility, and increased heterogeneity in preferences, factors that are normally considered to be arguments in favor of decentralization, may reduce the attractiveness of the decentralized solution from a welfare perspective. Finally, we show that when the national median voter is an “extreme” type, decentralization may represent a way of protecting local minority interests.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1032.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1032

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References

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  1. Bolton, Patrick & Roland, Gerard, 1996. "Distributional Conflicts, Factor Mobility, and Political Integration," American Economic Review, American Economic Association, vol. 86(2), pages 99-104, May.
  2. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February.
  3. Ellingsen, Tore, 1998. "Externalities vs internalities: a model of political integration," Journal of Public Economics, Elsevier, vol. 68(2), pages 251-268, May.
  4. Caroline Minter Hoxby, 1996. "Are Efficiency and Equity in School Finance Substitutes or Complements?," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 51-72, Fall.
  5. Cremer, J. & Palfrey, T.R., 1994. "In or Out?: Centralization by Majority Vote," Papers 94.335, Toulouse - GREMAQ.
  6. Raquel Fernandez & Richard Rogerson, 2003. "Equity and Resources: An Analysis of Education Finance Systems," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 858-897, August.
  7. Timothy Besley & Stephen Coate, 1999. "Centralized versus Decentralized Provision of Local Public Goods: A Political Economy Analysis," NBER Working Papers 7084, National Bureau of Economic Research, Inc.
  8. 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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Cited by:
  1. Tranchant, Jean-Pierre, 2010. "Does Fiscal Decentralization Dampen All Ethnic Conflicts? The heterogeneous Impact of Fiscal Decentralization on Local Minorities and Local Majorities," MPRA Paper 22776, University Library of Munich, Germany.

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