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Is there a local knowledge advantage in federations? Evidence from a natural experiment

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  • André Schultz

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  • Alexander Libman

    ()

Abstract

In economics, the local knowledge advantage is arguably one of the key arguments in favor of decentralizing the public sector. However, empirical investigations of this particular effect have been scarce. This paper tests the existence of the local knowledge advantage in a real-world setting. Specifically, it looks at the variation in local knowledge across regions based on the origins and careers of regional politicians, assuming that politicians who have spent more time in a particular region possess more and better knowledge of that region than outsiders. To avoid the reverse causality problem, the paper investigates how local origins affected the performances of politicians in a ‘natural experimental’ environment, studying the responses of regional governors in Russia to disastrous forest fires in 2010. We confirm that local knowledge improves gubernatorial performance. In a highly centralized federation such as Russia, though, the effect is dependent on access to federal resources obtainable through close ties to the federal center. We also discuss alternative interpretations of the local origins of politicians and test whether the effects found are indeed more plausibly explained by local knowledge. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • André Schultz & Alexander Libman, 2015. "Is there a local knowledge advantage in federations? Evidence from a natural experiment," Public Choice, Springer, vol. 162(1), pages 25-42, January.
  • Handle: RePEc:kap:pubcho:v:162:y:2015:i:1:p:25-42
    DOI: 10.1007/s11127-014-0187-x
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    References listed on IDEAS

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    Cited by:

    1. Leppänen, Simo & Solanko, Laura & Kosonen, Riitta, 2015. "Could climate change affect government expenditures? Early evidence from the Russian regions," BOFIT Discussion Papers 27/2015, Bank of Finland, Institute for Economies in Transition.
    2. repec:kap:pubcho:v:171:y:2017:i:3:d:10.1007_s11127-017-0440-1 is not listed on IDEAS
    3. repec:spr:soinre:v:132:y:2017:i:1:d:10.1007_s11205-016-1258-9 is not listed on IDEAS
    4. Libman Alexander & Schultz André & Graeber Thomas, 2016. "Tax Return as a Political Statement," Review of Law & Economics, De Gruyter, vol. 12(2), pages 377-445, July.

    More about this item

    Keywords

    Decentralization; Local knowledge; Federal connections; Exogenous shocks; Russian regions; D73; H77; P26;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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