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The Organization of Public Service Provision

  • William Jack

This paper addresses the question of how the responsibility for the delivery of social services, including health, education, and welfare programs, should be divided between state and central governments. We combine a random voting model and the incomplete contracts paradigm to formalize the trade-off between central and state responsibility for service delivery, and find that authority should rest with the party for whom the marginal impact of the service on re-election chances is greater. This in turn means that, other things equal, states with lower than average health, education, or welfare status should be given responsibility for service delivery, while authority in states with above average indicators should reside with the central government. Also, we show that there is no presumption that states that are given authority for service delivery should necessarily be granted expanded tax authority. Copyright 2004 Blackwell Publishing Inc..

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Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 6 (2004)
Issue (Month): 3 (08)
Pages: 409-425

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Handle: RePEc:bla:jpbect:v:6:y:2004:i:3:p:409-425
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  1. Wallace E. Oates, 1999. "An Essay on Fiscal Federalism," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1120-1149, September.
  2. Oliver Hart & Andrei Shleifer & Robert Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," Harvard Institute of Economic Research Working Papers 1778, Harvard - Institute of Economic Research.
  3. Rajan, Raghuram G & Zingales, Luigi, 1998. "Power in a Theory of the Firm," CEPR Discussion Papers 1777, C.E.P.R. Discussion Papers.
  4. repec:tpr:qjecon:v:113:y:1998:i:2:p:361-386 is not listed on IDEAS
  5. Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
  6. Timothy Besley & Stephen Coate, 1999. "Centralized versus Decentralized Provision of Local Public Goods: A Political Economy Analysis," NBER Working Papers 7084, National Bureau of Economic Research, Inc.
  7. Jan K. Brueckner, 1999. "Welfare Reform and the Race to the Bottom: Theory and Evidence," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 505-525, January.
  8. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Caroline M. Hoxby, 2002. "School Choice and School Productivity (or Could School Choice be a Tide that Lifts All Boats?)," NBER Working Papers 8873, National Bureau of Economic Research, Inc.
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