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

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Author Info
Giampaolo Garzarelli (University of Rome 'La Sapienza')

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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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Publisher 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
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Handle: RePEc:wpa:wuwppe:0512013

Note: Type of Document - pdf; pages: 31
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Web page: http://129.3.20.41

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

Find related papers by JEL classification:
D6 - Microeconomics - - Welfare Economics
D7 - Microeconomics - - Analysis of Collective Decision-Making
H - Public Economics

This paper has been announced in the following NEP Reports:

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. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. 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.
  4. 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. [Downloadable!] (restricted)
  5. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Preserving Market Incentives," Working Papers 97042, Stanford University, Department of Economics. [Downloadable!]
  6. Qian, Yingyi & Weingast, Barry R, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
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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. Garzarelli, Giampaolo, 2006. "The Organizational Approach of Capability Theory: A Review Essay," MPRA Paper 4362, University Library of Munich, Germany. [Downloadable!]
  2. 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. [Downloadable!]
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