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Decentralization as an incentive scheme when regional differences are large

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  • Pierre Salmon

    (Université de Bourgogne LEG/AMIE)

Abstract

It has been suggested that large regional differences could be an obstacle to that part of the political accountability of office-holders which is based on yardstick competition among governments. The paper addresses that question and concludes that the obstacle is not too serious in general. The second part of the paper is devoted to the persistent economic underperformance of some regions in countries such as Germany, Italy and (with regard to regions overseas) France. How is it that the mechanism of yardstick competition induces a convergence of economic performance among European Union member countries, even those particularly poor initially, but fails to induce all the underperforming regions of these countries to catch up? A small model is used to explore that question. In the case of the persistently underperforming regions, it turns out that the degree of regional differentiation is not sufficient for yardstick competition to work and bring about an improvement in performance. The yardstick competition framework remains useful if it helps to understand more clearly why this is so.

Suggested Citation

  • Pierre Salmon, 2009. "Decentralization as an incentive scheme when regional differences are large," LEG - Document de travail - Economie e2009-13, LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne.
    • Handle: RePEc:lat:legeco:e2009-13
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    Cited by:

    1. Benos, Christos & Angelopoulou, Ioanna & Metaxas, Theodore, 2017. "“Decentralization” of income per capita and its relationship to administrative decentralization in the context of European Union members," MPRA Paper 78777, University Library of Munich, Germany.

    More about this item

    Keywords

    yardstick competition; political competition; regional development;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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