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The Filtering Effect of Sharing Rules

  • G. Dari Mattiacci
  • G.G.A. de Geest

Abstract We provide an explanation for why centralisation of political decision making results in overspending in some policy domains, whereas too low spending persists in others. We study a model in which delegates from jurisdictions bargain over local public goods provision. If all of the costs of public goods are shared through a common budget, policy makers delegate bargaining to `public good lovers', resulting in overprovision of public goods. If a sufficiently large part of the costs can no be shared, underprovision persists because policy makers delegate bargaining to `conservatives'. We derive financing rules that eliminate the incentives for strategic delegation. Keywords: Centralised decision making, strategic delegation, financing rules

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Paper provided by Utrecht School of Economics in its series Working Papers with number 04-17.

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Date of creation: 2004
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Handle: RePEc:use:tkiwps:0417
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  16. Emons,Winand & Sobel,Joel, 1988. "On the effectiveness of liability rules when agents are not identical," Discussion Paper Serie A 212, University of Bonn, Germany.
  17. F. Parisi & Guiseppe Dari Mattiaci, 2003. "The Rise and Fall of Communal Liability in Ancient Law," Working Papers 03-12, Utrecht School of Economics.
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  19. Sloan, Frank A & Reilly, Bridget A & Schenzler, Christoph, 1995. "Effects of Tort Liability and Insurance on Heavy Drinking and Drinking and Driving," Journal of Law and Economics, University of Chicago Press, vol. 38(1), pages 49-77, April.
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