The political economy of fixed regional investment shares with an illustration for Belgian Railway investments
Many local public goods are allocated by federal governments using fixed regional shares: every region is entitled a fixed share of the total budget for a particular type of public good. This paper compares this fixed regional sharing rule with two alternative allocation rules: first best and common pool allocation. We find that the fixed regional sharing rule performs relatively well if the regional shares are reasonable. Legislative bargaining theory is used to study the determination of the fixed regional shares.
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