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Cognition, Incentives, and Public Governance:Laboratory Federalism from the Organizational Viewpoint

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  • Giampaolo Garzarelli

    (University of Rome 'La Sapienza')

Abstract

The Second Generation Theory (SGT) of fiscal federalism, which draws upon contemporary economic and industrial organization theory, hitherto focuses only on the negative benefits of public decentralization: the potentially superior ability to align perverse incentives vis-à-vis the centralized governance alternative. The SGT neglects the positive benefits of decentralization (mistake-ridden learning, flexibility, and option discovery), although the limitations of organization theory do not justify such neglect. By likening intergovernmental grants to incomplete contracts, this work shows that the SGT can include the laboratory nature of decentralization.

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File URL: http://128.118.178.162/eps/pe/papers/0512/0512013.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0512013.

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Length: 31 pages
Date of creation: 29 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwppe:0512013

Note: Type of Document - pdf; pages: 31
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Web page: http://128.118.178.162

Related research

Keywords: Experimentation; incomplete contracts; intergovernmental grants; learning; Second Generation Theory of fiscal federalism.;

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References

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  1. Seabright, Paul, 1994. "Accountability and Decentralization in Government: An Incomplete Contracts Model," CEPR Discussion Papers 889, C.E.P.R. Discussion Papers.
  2. Vanberg, Viktor & Buchanan, James M, 1986. "Organization Theory and Fiscal Economics: Society, State, and Public Debt," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 215-27, Fall.
  3. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Preserving Market Incentives," Working Papers 97042, Stanford University, Department of Economics.
  4. Mariano Tommasi & Federico Weinschelbaum, 2007. "Centralization vs. Decentralization: A Principal-Agent Analysis," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(2), pages 369-389, 04.
  5. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  6. Strumpf, Koleman S, 2002. " Does Government Decentralization Increase Policy Innovation?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(2), pages 207-41.
  7. Teece, David J., 1980. "Economies of scope and the scope of the enterprise," Journal of Economic Behavior & Organization, Elsevier, vol. 1(3), pages 223-247, September.
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Cited by:
  1. Garzarelli, Giampaolo & Limam, Yasmina Reem & Thomassen, Bjørn, 2007. "Open Source Software and Economic Growth: A Classical Division of Labor Perspective," MPRA Paper 3849, University Library of Munich, Germany.
  2. Garzarelli, Giampaolo, 2006. "The Organizational Approach of Capability Theory: A Review Essay," MPRA Paper 4362, University Library of Munich, Germany.

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