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Electoral Competition, Decentralization, and Public Investment Underprovision

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  • Marco Magnani

Abstract

The paper analyzes the optimal level of decentralization in local-public-good provision. Although all voters pay for such investments, only a subset benefit from them; their rate of return, however, is positive. Through pork-barrel projects, which do not increase welfare, any resource allocation is realizable. Candidates competing in local and national elections therefore face a trade-off between targetability and efficiency, which causes some profitable projects to be discarded. Decentralization affects underinvestment because the share of the electorate who benefit from an investment and the share of total budget absorbed by its costs depend on the size of that electorate.

Suggested Citation

  • Marco Magnani, 2010. "Electoral Competition, Decentralization, and Public Investment Underprovision," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 321-343, June.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201006)166:2_321:ecdapi_2.0.tx_2-8
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    References listed on IDEAS

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    1. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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