To Fragment or to Consolidate Jurisdictions: the Optimal Architecture of Government
Fiscal decentralisation is a hot issue worldwide. Within the European Union, there are even opposing tendencies with respect to the assignment of responsibilities between government tiers. This is a textbook paper aiming to provide a pedagogic introduction to the economics of government formation. Government size and district boundaries are endogenously set. Through a unified diagrammatic framework, the paper stresses the impact many politico-economic factors are likely to exert upon those endogenous variables. The list includes heterogeneity in demand for and supply of local public goods, cost sharing, scale economies, interjurisdictional spillovers, mobility of consumer-voters, congestion degrees, governance costs, and second-best finance. The analysis thus provides a foundation for a vertical system of multifunction governments very much in the pioneering spirit of Mancur Olson and Wallace Oates.
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- Pranab Bardhan and and Dilip Mookherjee., 1999.
"Relative Capture of Local and Central Governments: An Essay in the Political Economy of Decentralization,"
Center for International and Development Economics Research (CIDER) Working Papers
C99-109, University of California at Berkeley.
- Pranab Bardhan & Dilip Mookherjee, 1999. "Relative Capture of Local and Central Governments: An Essay in the Political Economy of Decentralization," Boston University - Institute for Economic Development 97, Boston University, Institute for Economic Development.
- Bardhan, Pranab & Mookherjee, Dilip, 2002. "Relative Capture of Local and Central Governments: An Essay in the Political Economy of Decentralization," Center for International and Development Economics Research, Working Paper Series qt9gx7t5hd, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- James R. Baumgardner, 1993. "Tests of Median Voter and Political Support Maximization Models: the Case of Federal/State Welfare Programs," Public Finance Review, , vol. 21(1), pages 48-83, January.
- Olson, Mancur, Jr, 1969. "The Principle of "Fiscal Equivalence": The Division of Responsibilities among Different Levels of Government," American Economic Review, American Economic Association, vol. 59(2), pages 479-87, May.
- Hochman, Oded & Pines, David & Thisse, Jacques-Francois, 1995.
"On the Optimal Structure of Local Governments,"
American Economic Review,
American Economic Association, vol. 85(5), pages 1224-40, December.
- Hochman, Oded & Pines, David & Thisse, Jacques-François, 1994. "On the Optimal Structure of Local Governments," CEPR Discussion Papers 899, C.E.P.R. Discussion Papers.
- Hochman, O. & Pines, D. & Thisse, J.-F., . "On the optimal structure of local governments," CORE Discussion Papers RP -1185, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
- Dougan, William R & Kenyon, Daphne A, 1988. "Pressure Groups and Public Expenditures: The Flypaper Effect Reconsidered," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 159-70, January.
- Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
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