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A simple dynamic decentralized leadership model with private savings and local borrowing regulation

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  • Akai, Nobuo
  • Sato, Motohiro

Abstract

This paper considers a simple dynamic decentralized leadership model with local borrowing and regional productivity-enhancing investment. In this model, the central government is benevolent but cannot commit to ex post intergovernmental transfer policies, while local governments act strategically after accounting for the ex post motives of the central government. We then investigate inefficiency in the subgame perfect equilibrium. We analyze the effect of central control on local borrowing and show that central control is of no benefit because ex ante local taxation works to offset it. We find the model yields different policy implications that central control is effective when extended to the case of residential mobility.

Suggested Citation

  • Akai, Nobuo & Sato, Motohiro, 2011. "A simple dynamic decentralized leadership model with private savings and local borrowing regulation," Journal of Urban Economics, Elsevier, vol. 70(1), pages 15-24, July.
  • Handle: RePEc:eee:juecon:v:70:y:2011:i:1:p:15-24
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    References listed on IDEAS

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    Cited by:

    1. repec:hpe:journl:y:2017:v:221:i:2:p:113-134 is not listed on IDEAS
    2. Timothy J. Goodspeed, 2017. "Bailouts and Soft Budget Constraints in Decentralized Government: A Synthesis and Survey of an Alternative View of Intergovernmental Grant Policy," Hacienda Pública Española, IEF, vol. 221(2), pages 113-134, June.
    3. Miyazaki, Takeshi, 2016. "Intergovernmental Fiscal Transfers and Tax Efforts: Evidence from Japan," MPRA Paper 74337, University Library of Munich, Germany.

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