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Partial decentralization as a safeguard against favoritism


  • Darwin Cortés



In this paper I investigate the optimal level of decentralization of tasks for theprovision of a local public good. I enrich the well-known trade-off between internalization of spillovers (that favors centralization) and accountability (that favors decentralization) by considering that public goods are produced through multiple tasks. This adds an additional institutional setting, partial decentralization, to the classical choice between full decentralization and full centralization. The main results are that partial decentralization is optimal when both the variance of exogenous shocks to electorate´s utility is large and the electorate expects high performance from politicians. I also show that the optimal institutional setting depends on the degree of substitutability/complementarity between tasks. In particular, I show that a large degree of substitutability between tasks makes favoritism more likely, which increases the desirability of partial decentralization as a safeguard against favoritism.

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  • Darwin Cortés, 2010. "Partial decentralization as a safeguard against favoritism," DOCUMENTOS DE TRABAJO 007933, UNIVERSIDAD DEL ROSARIO.
  • Handle: RePEc:col:000092:007933

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    References listed on IDEAS

    1. Capps, Cory & Dranove, David & Satterthwaite, Mark, 2003. " Competition and Market Power in Option Demand Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 737-763, Winter.
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    3. Ching-To Albert Ma & Michael H. Riordan, 2002. "Health Insurance, Moral Hazard, and Managed Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(1), pages 81-107, March.
    4. Bijlsma, Michiel & Boone, Jan & Zwart, Gijsbert, 2009. "Selective contracting and foreclosure in health care markets," CEPR Discussion Papers 7576, C.E.P.R. Discussion Papers.
    5. David Bardey & Jean-Charles Rochet, 2010. "Competition Among Health Plans: A Two-Sided Market Approach," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 435-451, June.
    6. Bourgeon, Jean-Marc & Picard, Pierre & Pouyet, Jerome, 2008. "Providers' affiliation, insurance and collusion," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 170-186, January.
    7. Andrew M. Jones (ed.), 2006. "The Elgar Companion to Health Economics," Books, Edward Elgar Publishing, number 3572.
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    More about this item


    Accountability; Multitask; Internalization of spillovers; Substitution.;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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