Centralized versus Decentralized Provision of Local Public Goods: a Political Economy Analysis
AbstractThis paper takes a fresh look at the trade-off between centralized and decentralized provision of local public goods. The point of departure is to model a centralized system as one in which public spending is financed by general taxation, but districts can receive different levels of local public goods. In a world of benevolent governments, the disadvantages of centralization stressed in the existing literature disappear, suggesting that the case for decentralization must be driven by political economy considerations. Our political economy analysis assumes that under decentralization public goods are selected by locally elected representatives, while under a centralized system policy choices are determined by a legislature consisting of elected representatives from each district. We then study the role of taste heterogeneity, spillovers and legislative behaviour in determining the case for centralization.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2495.
Date of creation: Jul 2000
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Other versions of this item:
- 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.
- H40 - Public Economics - - Publicly Provided Goods - - - General
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
- P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
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