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Centralization vs. Decentralization: A Principal-Agent Analysis

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  • MARIANO TOMMASI
  • FEDERICO WEINSCHELBAUM

Abstract

The decision to allocate policy jurisdictions to different levels of government is related to a number of trade-offs between the advantages and disadvantages of centralized versus decentralized provision of public services. A trade-off central to many discussions is that between the internalization of externalities under centralization versus an "accountability" advantage of decentralization. In this paper we formalize this trade-off in the context of a class of principal-agent models known as common agency. Copyright 2007 Blackwell Publishing, Inc..

Suggested Citation

  • 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, April.
  • Handle: RePEc:bla:jpbect:v:9:y:2007:i:2:p:369-389
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    References listed on IDEAS

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    1. Yebra, Covadonga Meseguer, 2000. "Learning and economic policy choices with an application to IMF agreements," ISER Working Paper Series 2000-02, Institute for Social and Economic Research.
    2. Mariano Tommasi & Federico Weinschelbaum, 2007. "Principal-Agent Contracts under the Threat of Insurance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(3), pages 379-393, September.
    3. Bardhan, Pranab & Mookherjee, Dilip, 1998. "Expenditure Decentralization and the Delivery of Public Services in Developing Countries," Center for International and Development Economics Research (CIDER) Working Papers 233623, University of California-Berkeley, Department of Economics.
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