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Cognition, Incentives, and Public Governance:Laboratory Federalism from the Organizational Viewpoint

Author

Listed:
  • Giampaolo Garzarelli

    (University of Rome 'La Sapienza')

Abstract

The Second Generation Theory (SGT) of fiscal federalism, which draws upon contemporary economic and industrial organization theory, hitherto focuses only on the negative benefits of public decentralization: the potentially superior ability to align perverse incentives vis-à-vis the centralized governance alternative. The SGT neglects the positive benefits of decentralization (mistake-ridden learning, flexibility, and option discovery), although the limitations of organization theory do not justify such neglect. By likening intergovernmental grants to incomplete contracts, this work shows that the SGT can include the laboratory nature of decentralization.

Suggested Citation

  • Giampaolo Garzarelli, 2005. "Cognition, Incentives, and Public Governance:Laboratory Federalism from the Organizational Viewpoint," Public Economics 0512013, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwppe:0512013
    Note: Type of Document - pdf; pages: 31
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/pe/papers/0512/0512013.pdf
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    References listed on IDEAS

    as
    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    2. Vanberg, Viktor & Buchanan, James M, 1986. "Organization Theory and Fiscal Economics: Society, State, and Public Debt," Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(2), pages 215-227, Fall.
    3. repec:cup:apsrev:v:55:y:1961:i:04:p:831-842_12 is not listed on IDEAS
    4. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall.
    5. Mariano Tommasi & Federico Weinschelbaum, 2007. "Centralization vs. Decentralization: A Principal-Agent Analysis," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(2), pages 369-389, April.
    6. Teece, David J., 1980. "Economies of scope and the scope of the enterprise," Journal of Economic Behavior & Organization, Elsevier, vol. 1(3), pages 223-247, September.
    7. Strumpf, Koleman S, 2002. " Does Government Decentralization Increase Policy Innovation?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(2), pages 207-241.
    8. Seabright, Paul, 1996. "Accountability and decentralisation in government: An incomplete contracts model," European Economic Review, Elsevier, vol. 40(1), pages 61-89, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Garzarelli, Giampaolo, 2006. "The Organizational Approach of Capability Theory: A Review Essay," MPRA Paper 4362, University Library of Munich, Germany.
    2. Garzarelli, Giampaolo & Limam, Yasmina Reem & Thomassen, Bjørn, 2007. "Open Source Software and Economic Growth: A Classical Division of Labor Perspective," MPRA Paper 3849, University Library of Munich, Germany.

    More about this item

    Keywords

    Experimentation; incomplete contracts; intergovernmental grants; learning; Second Generation Theory of fiscal federalism.;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H - Public Economics

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