Inefficient centralization of imperfect complements
AbstractIf local public goods exhibit spillovers and regions are sufficiently symmetric, decentralization implies underprovision, whereas cooperative centralization is associated with strict Pareto-improvement. This classic inference rests on two assumptions: local politicians are delegated sincerely and never provide voluntary transfers to the other regions. We abandon these assumptions in a setup of two symmetric regions with imperfect complementarity between local public goods. For this particular aggregation, non-cooperative decentralization can achieve the social optimum, whereas cooperative centralization cannot.
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Bibliographic InfoPaper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2007/19.
Length: 23 pages
Date of creation: Jun 2007
Date of revision: Jun 2007
centralization; public goods; strategic delegation; weakest-link; voluntary transfers;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H40 - Public Economics - - Publicly Provided Goods - - - General
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-18 (All new papers)
- NEP-GTH-2007-06-18 (Game Theory)
- NEP-PBE-2007-06-18 (Public Economics)
- NEP-URE-2007-06-18 (Urban & Real Estate Economics)
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- repec:ebl:ecbull:v:8:y:2008:i:3:p:1-7 is not listed on IDEAS
- Martin Gregor, 2008. "On the strategic non-complementarity of complements," Economics Bulletin, AccessEcon, vol. 8(3), pages 1-7.
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