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Government and Cities: Contests and the Decentralization of Decision Making

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Author Info
Epstein, Gil S. (Bar-Ilan University, CEPR, and IZA Bonn)
Gang, Ira N. () (Rutgers University and IZA Bonn)

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Abstract

Governments do not have perfect information regarding the priorities and the needs of different groups in the economy. This lack of knowledge opens the door for different groups to lobby the government in order to receive the government’s support. We set up a model of hierarchical contests and compare the implications of a centralized allocation process with a decentralized allocation process. We show the potential existence of a poverty trap as a result of fiscal federalism.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 547.

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Length: 30 pages
Date of creation: Aug 2002
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Handle: RePEc:iza:izadps:dp547

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Related research
Keywords: fiscal federalism; economic models of political processes; contests; rentseeking; intergovernmental relations; interjurisdictional differentials and their effects;

Other versions of this item:

Find related papers by JEL classification:
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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References listed on IDEAS
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.:
  1. Gil S. Epstein & Shmuel Nitzan, 2002. "Endogenous Public Policy, Politicization and Welfare," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(4), pages 661-677, October. [Downloadable!] (restricted)
  2. Baik, Kyung Hwan & Lee, Sanghack, 2000. " Two-Stage Rent-Seeking Contests with Carryovers," Public Choice, Springer, vol. 103(3-4), pages 285-96, June. [Downloadable!] (restricted)
  3. Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March. [Downloadable!] (restricted)
  4. Gang, Ira N. & Ali Khan, Haider, 1990. "Foreign aid, taxes, and public investment," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 355-369, November. [Downloadable!] (restricted)
  5. Zhuravskaya, Ekaterina V., 2000. "Incentives to provide local public goods: fiscal federalism, Russian style," Journal of Public Economics, Elsevier, vol. 76(3), pages 337-368, June. [Downloadable!] (restricted)
    Other versions:
  6. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
    Other versions:
  7. Zampelli, Ernest M, 1986. "Resource Fungibility, the Flypaper Effect, and the Expenditure Impact of Grants-in-Aid," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 33-40, February. [Downloadable!] (restricted)
  8. Cashel-Cordo, Peter & Craig, Steven G., 1990. "The public sector impact of international resource transfers," Journal of Development Economics, Elsevier, vol. 32(1), pages 17-42, January. [Downloadable!] (restricted)
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  10. Epstein, Gil S. & Nitzan, Shmuel, 2002. "Political Culture and Monopoly Price Determination," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  11. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics. [Downloadable!]
  12. Goodspeed, Timothy J., 2000. "Tax structure in a federation," Journal of Public Economics, Elsevier, vol. 75(3), pages 493-506, March. [Downloadable!] (restricted)
  13. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May. [Downloadable!] (restricted)
  14. Pack, Howard & Pack, Janet Rothenberg, 1993. "Foreign Aid and the Question of Fungibility," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 258-65, May. [Downloadable!] (restricted)
  15. Nitzan, Shmuel I, 1977. "Revenue Sharing in Multiperson Public Choice Models," The Quarterly Journal of Economics, MIT Press, vol. 91(2), pages 315-26, May. [Downloadable!] (restricted)
  16. Swaroop, Vinaya & Jha, Shikha & Sunil Rajkumar, Andrew, 2000. "Fiscal effects of foreign aid in a federal system of governance: The case of India," Journal of Public Economics, Elsevier, vol. 77(3), pages 307-330, September. [Downloadable!] (restricted)
  17. Robin W. Boadway & Frank R. Flatters, 1982. "Efficiency and Equalization Payments in a Federal System of Government: A Synthesis and Extension of Recent Results," Canadian Journal of Economics, Canadian Economics Association, vol. 15(4), pages 613-33, November. [Downloadable!] (restricted)
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  19. Gradstein, Mark, 1994. "Efficient Provision of a Discrete Public Good," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 877-97, November. [Downloadable!] (restricted)
  20. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September. [Downloadable!] (restricted)
  21. Heller, Peter S, 1975. "A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation," American Economic Review, American Economic Association, vol. 65(3), pages 429-45, June. [Downloadable!] (restricted)
  22. Goodspeed, Timothy J., 1995. "Local income taxation: An externality, Pigouvian solution, and public policies," Regional Science and Urban Economics, Elsevier, vol. 25(3), pages 279-296, June. [Downloadable!] (restricted)
  23. Konrad, Kai A, 1994. "The Strategic Advantage of Being Poor: Private and Public Provision of Public Goods," Economica, London School of Economics and Political Science, vol. 61(241), pages 79-92, February. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Ira N. Gang & Gil S. Epstein, 2002. "Understanding the Development of Fundamentalism," Departmental Working Papers 200222, Rutgers University, Department of Economics. [Downloadable!]
    Other versions:
  2. Gil S. Epstein & Ira N. Gang, 2005. "Contests, NGOs and Decentralizing Aid," IZA Discussion Papers 1711, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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