This paper surveys recent contributions to the study of fiscal decentralization which adopt a political economy approach. It is argued that this approach can capture, in a variety of formal models, the plausible and influential ideas (increasingly, supported by empirical evidence) that fiscal decentralization can lead to improved preference-matching and accountability of government. In particular, recent work on centralized provision of public good provision via bargaining in a legislature shows how centralization reduces preference-matching, and recent work using "electoral agency" models formalizes the accountability argument. These models also provide insights into when decentralization may fail to deliver these benefits.
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Find related papers by JEL classification: H41 - Public Economics - - Publicly Provided Goods - - - Public Goods H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
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