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Partial fiscal decentralization

  • Brueckner, Jan K.

The fiscal decentralization impulse now sweeping the world often leads to partial decentralization, where subnational governments are funded by central transfers, rather than leading to full local autonomy. Despite the practical important of this arrangement, the literature contains no economic analysis of a partial decentralization regime in a Tiebout-style model. This paper provides such an analysis, relying on the key assumption that public-good provision requires effort on the part of government officials. By choosing different degrees of effort, localities can then provide different public-good levels even when a fixed, common transfer constrains them to spend the same amount. A number of useful results are derived.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 39 (2009)
Issue (Month): 1 (January)
Pages: 23-32

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Handle: RePEc:eee:regeco:v:39:y:2009:i:1:p:23-32
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  1. Jan K. Brueckner, 2004. "Fiscal Decentralization with Distortionary Taxation: Tiebout vs. Tax Competition," International Tax and Public Finance, Springer, vol. 11(2), pages 133-153, 03.
  2. Lorz, Jens Oliver & Willmann, Gerald, 2004. "On the Endogenous Allocation of Decision Powers in Federal Structures," Center for European, Governance and Economic Development Research Discussion Papers 25, University of Goettingen, Department of Economics.
  3. Ben Lockwood, 2002. "Distributive Politics and the Costs of Centralization," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 313-337.
  4. Scotchmer, Suzanne & Wooders, Myrna Holtz, 1987. "Competitive equilibrium and the core in club economies with anonymous crowding," Journal of Public Economics, Elsevier, vol. 34(2), pages 159-173, November.
  5. Shah, Anwar, 2004. "Fiscal decentralization in developing and transition economies: progress, problems, and the promise," Policy Research Working Paper Series 3282, The World Bank.
  6. Brueckner, Jan K., 2000. "A Tiebout/tax-competition model," Journal of Public Economics, Elsevier, vol. 77(2), pages 285-306, August.
  7. Jeremy Edwards & Michael Keen, 1994. "Tax competition and Leviathon," IFS Working Papers W94/07, Institute for Fiscal Studies.
  8. Wooders, Myrna, 1978. "Equilibria, the core, and jurisdiction structures in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 18(2), pages 328-348, August.
  9. Berglas, Eitan, 1976. "On the Theory of Clubs," American Economic Review, American Economic Association, vol. 66(2), pages 116-21, May.
  10. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  11. James R. Hines Jr (ed.), . "Tax Competition," Books, Edward Elgar, number 14897.
  12. Berglas, Eitan & Pines, David, 1980. "Clubs as a case of competitive industry with goods of variable quality," Economics Letters, Elsevier, vol. 5(4), pages 363-366.
  13. Robert Schwager, 1999. "Administrative Federalism and a Central Government with Regionally Based Preferences," International Tax and Public Finance, Springer, vol. 6(2), pages 165-189, May.
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