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Why So Much Centralization? A Model of Primitive Centripetal Accumulation


  • Jean-Paul Faguet


With strong conceptual arguments in its favor, decentralization is a popular and growing policy trend across the world. And yet dozens of empirical studies have failed to find convincing evidence that past reforms have worked. This begs two questions: 1)Why does decentralization produce indifferent results? and 2) Why is there so much centralization in the first place? The paper develops a simple model of a legislature in which municipal representatives bargain with central government agents over the allocation of public resources. By locating central government in a particular geographic space ¿ the ¿capital¿ ¿ and invoking self-interest on the part of its residents, I can answer both questions. I introduce the concept of residual power, which underpins the model and determines the flow of resources to districts. There is so much centralization because residual power is located in the capital, whose residents directly benefit from weak local governments.

Suggested Citation

  • Jean-Paul Faguet, 2004. "Why So Much Centralization? A Model of Primitive Centripetal Accumulation," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 43, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  • Handle: RePEc:cep:stidep:43

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    References listed on IDEAS

    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Timothy Besley & Stephen Coate, 1999. "Centralized versus Decentralized Provision of Local Public Goods: A Political Economy Analysis," NBER Working Papers 7084, National Bureau of Economic Research, Inc.
    3. Antonio Estache, 1994. "World Development Report: Infrastructure for Development," ULB Institutional Repository 2013/44144, ULB -- Universite Libre de Bruxelles.
    4. Alberto Alesina & Nouriel Roubini, 1992. "Political Cycles in OECD Economies," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 663-688.
    5. Rubinfeld, Daniel L., 1987. "The economics of the local public sector," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 11, pages 571-645 Elsevier.
    6. Bardhan, Pranab & Mookherjee, Dilip, 1998. "Expenditure Decentralization and the Delivery of Public Services in Developing Countries," Center for International and Development Economics Research (CIDER) Working Papers 233623, University of California-Berkeley, Department of Economics.
    7. Breton,Albert, 1996. "Competitive Governments," Cambridge Books, Cambridge University Press, number 9780521481021, March.
    8. Richard A. Posner, 1974. "Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 335-358, Autumn.
    9. Roubini, Nouriel & Alesina, Alberto, 1992. "Political Cycles in OECD Economies," Scholarly Articles 4553025, Harvard University Department of Economics.
    10. Pommerehne, Werner W & Schneider, Friedrich, 1978. "Fiscal Illusion, Political Institutions, and Local Public Spending," Kyklos, Wiley Blackwell, vol. 31(3), pages 381-408.
    11. Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
    12. John Joseph Wallis & Wallace E. Oates, 1988. "Decentralization in the Public Sector: An Empirical Study of State and Local Government," NBER Chapters,in: Fiscal Federalism: Quantitative Studies, pages 5-32 National Bureau of Economic Research, Inc.
    13. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
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    Cited by:

    1. Giorgio Brosio & Juan Pablo Jiménez, 2011. "Maintaining taxes at the centre despite decentralization: interactions with national reforms," ICER Working Papers 10-2011, ICER - International Centre for Economic Research.
    2. Daniel Albalate & Germà Bel & Xavier Fageda, 2010. "Is it Redistribution or Centralization? On the Determinants of Government Investment in Infrastructure," Working Papers XREAP2010-15, Xarxa de Referència en Economia Aplicada (XREAP), revised Dec 2010.

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    Centralization; decentralization; local public goods; local government; municipal government; legislative bargaining; capture.;

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