Endogenous spillovers in the trade-off between centralization and decentralization
In this paper, we revisit the classical trade-o between centralized and decentralized provision of local public goods, in a setting where in- terregional spillovers depend on the level of a national public good. We compare the standard benevolent planner approach with a political econ- omy in which decisions, in a centralized system, are undertaken by a non-cooperative legislature with no separation of powers. We observe that the policy-maker in a centralized system is able to play both with local public goods and spillovers, a mechanism that is not available un- der a decentralized system. When compared to the traditional exogenous spillovers assumption, this improves the case for centralization under the standard benevolent planner approach. However, the same is not neces- sarily true in the non-cooperative legislature, as in this case the interests of the legislator do not need to be aligned with those of the society. Fi- nally, we extend the traditional political economy analysis by considering a legislature in which decisions are undertaken by di erent committees (separation of powers), and show that it performs better than the original non-cooperative legislature, greatly improving the case for centralization. JEL codes: D70, H11, H41, H70
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: Campus de Campolide, 1099-032 Lisboa|
Phone: (351) 21 3801638
Fax: (351) 21 3870933
Web page: http://www.fe.unl.pt
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Guillaume Cheikbossian, 2000. "Federalism, distributive politics and representative democracy," Economics of Governance, Springer, vol. 1(2), pages 105-122, 07.
- Oliver Koppel, 2005. "Reviewing Oates' insights in a repeated game setting," Economics of Governance, Springer, vol. 6(3), pages 229-243, November.
- Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October.
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
When requesting a correction, please mention this item's handle: RePEc:unl:unlfep:wp538. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sean Story)
If references are entirely missing, you can add them using this form.