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

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  • 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
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Garzarelli, Giampaolo, 2006. "The Organizational Approach of Capability Theory: A Review Essay," MPRA Paper 4362, University Library of Munich, Germany.

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    More about this item

    Keywords

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

    JEL classification:

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

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