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Partial Fiscal Decentralization

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  • Jan K. Brueckner

    ()
    (Department of Economics, University of California-Irvine)

Abstract

The fiscal decentralization impulse now sweeping the world often leads to partial decentralization, where subnational governments are funded by central transfers, rather than leading to full local autonomy. Despite the practical important of this arrangement, the literature contains no economic analysis of a partial decentralization regime in a Tiebout-style model. This paper provides such an analysis, relying on the key assumption that public-good provision requires effort on the part of government officials. By choosing different degrees of effort, localities can then provide different public-good levels even when a fixed, common transfer constrains them to spend the same amount. A number of useful results are derived.

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File URL: http://www.economics.uci.edu/files/economics/docs/workingpapers/2007-08/Brueckner-04.pdf
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Bibliographic Info

Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 070804.

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Length: 33 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:irv:wpaper:070804

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Keywords: Decentralization; Tiebout;

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References

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  1. Ben Lockwood, 2002. "Distributive Politics and the Costs of Centralization," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 313-337.
  2. Wooders, Myrna, 1978. "Equilibria, the core, and jurisdiction structures in economies with a local public good," Journal of Economic Theory, Elsevier, Elsevier, vol. 18(2), pages 328-348, August.
  3. Robert Schwager, 1999. "Administrative Federalism and a Central Government with Regionally Based Preferences," International Tax and Public Finance, Springer, Springer, vol. 6(2), pages 165-189, May.
  4. Lorz, Oliver & Willmann, Gerald, 2005. "On the endogenous allocation of decision powers in federal structures," Journal of Urban Economics, Elsevier, vol. 57(2), pages 242-257, March.
  5. Shah, Anwar, 2004. "Fiscal decentralization in developing and transition economies: progress, problems, and the promise," Policy Research Working Paper Series 3282, The World Bank.
  6. Brueckner, Jan K., 2000. "A Tiebout/tax-competition model," Journal of Public Economics, Elsevier, Elsevier, vol. 77(2), pages 285-306, August.
  7. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, Elsevier, vol. 40(1), pages 113-134, January.
  8. Scotchmer, Suzanne & Wooders, Myrna Holtz, 1987. "Competitive equilibrium and the core in club economies with anonymous crowding," Journal of Public Economics, Elsevier, Elsevier, vol. 34(2), pages 159-173, November.
  9. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 64, pages 416.
  10. Berglas, Eitan & Pines, David, 1980. "Clubs as a case of competitive industry with goods of variable quality," Economics Letters, Elsevier, Elsevier, vol. 5(4), pages 363-366.
  11. Berglas, Eitan, 1976. "On the Theory of Clubs," American Economic Review, American Economic Association, American Economic Association, vol. 66(2), pages 116-21, May.
  12. Jan K. Brueckner, 2004. "Fiscal Decentralization with Distortionary Taxation: Tiebout vs. Tax Competition," International Tax and Public Finance, Springer, Springer, vol. 11(2), pages 133-153, 03.
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Citations

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Cited by:
  1. Cheng, Yuk-Shing & Chung, Kim-Sau, 2013. "Too many mothers-in-law?," Journal of Development Economics, Elsevier, Elsevier, vol. 105(C), pages 69-76.
  2. Joanis, Marcelin, 2014. "Shared accountability and partial decentralization in local public good provision," Journal of Development Economics, Elsevier, Elsevier, vol. 107(C), pages 28-37.
  3. Brehm, Stefan, 2013. "Fiscal Incentives, Public Spending, and Productivity – County-Level Evidence from a Chinese Province," World Development, Elsevier, Elsevier, vol. 46(C), pages 92-103.
  4. Marta Curto-Grau & Albert Solé-Ollé & Pilar Sorribas-Navarro, 2012. "Partisan targeting of inter-governmental transfers & state interference in local elections: evidence from Spain," Working Papers 2012/31, Institut d'Economia de Barcelona (IEB).
  5. Paula Salinas, 2014. "The effect of decentralization on educational outcomes: real autonomy matters!," Working Papers 2014/25, Institut d'Economia de Barcelona (IEB).
  6. Massimo Bordignon & Santino Piazza, 2010. "Who do you blame in local finance? An analysis of municipal financing in Italy," DISCE - Quaderni dell'Istituto di Economia e Finanza, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) ief0094, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  7. Mario Jametti & Marcelin Joanis, 2010. "Determinants of fiscal decentralization: political economy aspects," Working Papers 2010/7, Institut d'Economia de Barcelona (IEB).
  8. Alexander Libman, 2012. "Sub-national political regimes and asymmetric fiscal decentralization," Constitutional Political Economy, Springer, Springer, vol. 23(4), pages 302-336, December.
  9. Borge, Lars-Erik & Brueckner, Jan K. & Rattsø, Jorn, 2014. "Partial fiscal decentralization and demand responsiveness of the local public sector: Theory and evidence from Norway," Journal of Urban Economics, Elsevier, vol. 80(C), pages 153-163.

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