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The Filtering Effect of Sharing Rules

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  • G. Dari Mattiacci
  • G.G.A. de Geest

Abstract

Abstract We provide an explanation for why centralisation of political decision making results in overspending in some policy domains, whereas too low spending persists in others. We study a model in which delegates from jurisdictions bargain over local public goods provision. If all of the costs of public goods are shared through a common budget, policy makers delegate bargaining to `public good lovers', resulting in overprovision of public goods. If a sufficiently large part of the costs can no be shared, underprovision persists because policy makers delegate bargaining to `conservatives'. We derive financing rules that eliminate the incentives for strategic delegation.

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Bibliographic Info

Paper provided by Utrecht School of Economics in its series Working Papers with number 04-17.

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Date of creation: 2004
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Handle: RePEc:use:tkiwps:0417

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Keywords: Centralised decision making; strategic delegation; financing rules;

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Cited by:
  1. De Geest, Gerrit, 2013. "N problems require N instruments," International Review of Law and Economics, Elsevier, vol. 35(C), pages 42-57.
  2. Nuno Garoupa, 2009. "Least-Cost Avoidance: The Tragedy of Common Safety," Journal of Law, Economics and Organization, Oxford University Press, vol. 25(1), pages 235-261, May.

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