The decentralization tradeoff for complementary spillovers
We examine a symmetric two-district setting with spillovers of local public spending where a spill-in from the foreign spending is not a substitute, but a complement to domestic spending. Specifically, we assume production of two district-specific public goods out of two complementary district-specific inputs. We compare equilibria in non-cooperative decentralization and cooperative centralization for different spillovers, complementarities and cost-division rules, and control for the effects of strategic delegation and the feasibility of voluntary contributions to the input in the foreign district. We find that centralization welfare-dominates decentralization in most institutional settings and for a wide range of parameters, yet we can also identify necessary and sufficient conditions for decentralization to welfare-dominate centralization. The setup features three novelties: In the absence of transfers, welfare in decentralization increases in spillovers, strategic delegation in decentralization improves welfare, and centralized provision may be non-monotonic in spillovers.
(This abstract was borrowed from another version of this item.)
Volume (Year): 16 (2012)
Issue (Month): 1 (March)
|Contact details of provider:|| Web page: https://sites.google.com/site/societyforeconomicdesign/|
|Order Information:||Web: http://www.springer.com/economics/journal/10058|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jan Schnellenbach & Lars Feld & Christoph Schaltegger, 2010.
"The impact of referendums on the centralisation of public goods provision: a political economy approach,"
Economics of Governance,
Springer, vol. 11(1), pages 3-26, February.
- Jan Schnellenbach & Lars Feld & Christoph schaltegger, 2007. "The Impact of Referendums on the Centralisation of Public Goods Provision: A Political Economy Approach," Working Papers 0440, University of Heidelberg, Department of Economics, revised May 2007.
- Jan Schnellenbach & Lars P. Feld & Christoph A. Schaltegger, 2006. "The Impact of Referendums on the Centralisation of Public Goods Provision: A Political Economy Approach," CESifo Working Paper Series 1803, CESifo Group Munich.
- Segendorff, Bjorn, 1998. "Delegation and Threat in Bargaining," Games and Economic Behavior, Elsevier, vol. 23(2), pages 266-283, May.
- Martin Gregor, 2011. "Tradeoffs of foreign assistance for the weakest-link global public goods," International Tax and Public Finance, Springer, vol. 18(2), pages 233-251, April.
- R Dur & H.J. Roelfsema, 2004.
"Why Does Centralisation Fail to Internalise Policy Externalities?,"
04-09, Utrecht School of Economics.
- Robert Dur & Hein Roelfsema, 2005. "Why does centralisation fail to internalise policy externalities?," Public Choice, Springer, vol. 122(3), pages 395-416, March.
- Robert A.J. Dur & Hein J. Roelfsema, 2002. "Why does Centralisation fail to internalise Policy Externalities?," Tinbergen Institute Discussion Papers 02-056/3, Tinbergen Institute, revised 11 Nov 2003.
- Debraj Ray & Jean-Marie Baland & Olivier Dagnelie, 2007.
"Inequality and Inefficiency in Joint Projects,"
Royal Economic Society, vol. 117(522), pages 922-935, 07.
- Cornes, Richard & Hartley, Roger, 2007.
"Weak links, good shots and other public good games: Building on BBV,"
Journal of Public Economics,
Elsevier, vol. 91(9), pages 1684-1707, September.
- Richard Cornes & Roger Hartley, . "Weak Links, Good Shots And Other Public Good Games: Building On Bbv," Discussion Papers 06/09, University of Nottingham, School of Economics.
- Richard Cornes & Roger Hartley, 2006. "Weak Links, Good Shots and other PublicGood Games: Building on BBV," The School of Economics Discussion Paper Series 0624, Economics, The University of Manchester.
- Ben Lockwood, 2008.
"Voting, Lobbying, And The Decentralization Theorem,"
Economics and Politics,
Wiley Blackwell, vol. 20(3), pages 416-431, November.
- Benjamin Lockwood, 2007. "Voting, Lobbying, and the Decentralization Theorem," CESifo Working Paper Series 2117, CESifo Group Munich.
- Lockwood, Ben, 2007. "Voting, Lobbying, and the Decentralization Theorem," The Warwick Economics Research Paper Series (TWERPS) 798, University of Warwick, Department of Economics.
- Ben Lockwood, 2007. "Voting, Lobbying and the Decentralization Theorem," Economics Working Papers ECO2007/06, European University Institute.
- Bloch, Francis & Zenginobuz, Unal, 2004.
"The Effect of Spillovers on the Provision of Local Public Goods,"
186, University Library of Munich, Germany, revised 05 Oct 2006.
- Francis Bloch & Unal Zenginobuz, 2007. "The effect of spillovers on the provision of local public goods," Review of Economic Design, Society for Economic Design, vol. 11(3), pages 199-216, November.
- Loeper, Antoine, 2011.
"Coordination in heterogeneous federal systems,"
Journal of Public Economics,
Elsevier, vol. 95(7-8), pages 900-912, August.
- Roelfsema, Hein, 2007.
"Strategic delegation of environmental policy making,"
Journal of Environmental Economics and Management,
Elsevier, vol. 53(2), pages 270-275, March.
- H.J. Roelfsema, 2004. "Strategic Delegation of Environmental Policy Making," Working Papers 04-11, Utrecht School of Economics.
- Bergstrom, Theodore C & Cornes, Richard C, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," Econometrica, Econometric Society, vol. 51(6), pages 1753-65, November.
- Koethenbuerger, Marko, 2008.
"Revisiting the "Decentralization Theorem"--On the role of externalities,"
Journal of Urban Economics,
Elsevier, vol. 64(1), pages 116-122, July.
- Marko Köthenbürger, 2007. "Revisiting the “Decentralization Theorem” – On the Role of Externalities," CESifo Working Paper Series 2128, CESifo Group Munich.
- Levaggi, Rosella, 2010.
"From local to global public goods: How should externalities be represented?,"
Elsevier, vol. 27(5), pages 1040-1042, September.
- Rosella Levaggi, 2009. "From local to global public goods: how should externalities be represented?," Working Papers 0903, University of Brescia, Department of Economics.
- Feidler, Janos & Staal, Klaas, 2008. "Centralized and decentralized provision of public goods," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 241, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Cheikbossian, Guillaume, 2008. "Rent-seeking, spillovers and the benefits of decentralization," Journal of Urban Economics, Elsevier, vol. 63(1), pages 217-228, January.
- Giuranno, Michele G., 2010. "Pooling sovereignty under the subsidiary principle," European Journal of Political Economy, Elsevier, vol. 26(1), pages 125-136, March.
- Vicary, Simon & Sandler, Todd, 2002. "Weakest-link public goods: Giving in-kind or transferring money," European Economic Review, Elsevier, vol. 46(8), pages 1501-1520, September.
- Bård Harstad, 2007. "Harmonization and Side Payments in Political Cooperation," American Economic Review, American Economic Association, vol. 97(3), pages 871-889, June.
- Michele Ruta, 2010. "Lobbying and (de)centralization," Public Choice, Springer, vol. 144(1), pages 275-291, July.
When requesting a correction, please mention this item's handle: RePEc:spr:reecde:v:16:y:2012:i:1:p:41-69. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.