Cognition, Incentives, and Public Governance:Laboratory Federalism from the Organizational Viewpoint
AbstractThe 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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Bibliographic InfoPaper provided by EconWPA in its series Public Economics with number 0512013.
Length: 31 pages
Date of creation: 29 Dec 2005
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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:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-CBE-2006-01-24 (Cognitive & Behavioural Economics)
- NEP-PBE-2006-01-24 (Public Economics)
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