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Fiscal Decentralization: A Political Economy Perspective

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  • Lockwood, Ben

    (University of Warwick and CEPR)

Abstract

This paper surveys recent contributions to the study of fiscal decentralization which adopt a political economy approach. It is argued that this approach can capture, in a variety of formal models, the plausible and influential ideas (increasingly, supported by empirical evidence) that fiscal decentralization can lead to improved preference-matching and accountability of government. In particular, recent work on centralized provision of public good provision via bargaining in a legislature shows how centralization reduces preference-matching, and recent work using "electoral agency" models formalizes the accountability argument. These models also provide insights into when decentralization may fail to deliver these benefits.

Suggested Citation

  • Lockwood, Ben, 2005. "Fiscal Decentralization: A Political Economy Perspective," The Warwick Economics Research Paper Series (TWERPS) 721, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:721
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    12. Seabright, Paul, 1996. "Accountability and decentralisation in government: An incomplete contracts model," European Economic Review, Elsevier, vol. 40(1), pages 61-89, January.
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    Cited by:

    1. Michela Redoano, 2010. "Does Centralization Affect the Number and Size of Lobbies?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(3), pages 407-435, June.
    2. Federico Etro, 2006. "Political geography," Public Choice, Springer, vol. 127(3), pages 321-343, June.
    3. Feder, Christophe, 2018. "Decentralization and spillovers: A new role for transportation infrastructure," Economics of Transportation, Elsevier, vol. 13(C), pages 36-47.
    4. Jorge Martinez-Vazquez & Santiago Lago-Peñas & Agnese Sacchi, 2017. "The Impact Of Fiscal Decentralization: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(4), pages 1095-1129, September.
    5. George Gelauff & Sjef Ederveen & J.L.M. Pelkmans, 2006. "Assessing subsidiarity," CPB Document 133, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Bhattacharyya, Sambit & Conradie, Louis & Arezki, Rabah, 2017. "Resource discovery and the politics of fiscal decentralization," Journal of Comparative Economics, Elsevier, vol. 45(2), pages 366-382.
    7. Ricardo Alonso & Wouter Dessein & Niko Matouschek, 2008. "When Does Coordination Require Centralization?," American Economic Review, American Economic Association, vol. 98(1), pages 145-179, March.
    8. Konte, Maty & Vincent, Rose Camille, 2021. "Mining and quality of public services: The role of local governance and decentralization," World Development, Elsevier, vol. 140(C).
    9. Alderighi, Marco & Feder, Christophe, 2020. "Institutional design, political competition and spillovers," Regional Science and Urban Economics, Elsevier, vol. 81(C).
    10. Jorge Martinez-Vazquez & Cristian Sepulveda, 2020. "A Theoretical Rationale for the Fiscal-Gap Model of Equalization Transfers," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 76(1), pages 1-28.
    11. Elacqua, Gregory & Munevar, Isabela & Sanchez, Fabio & Santos, Humberto, 2021. "The impact of decentralized decision-making on student outcomes and teacher quality: Evidence from Colombia," World Development, Elsevier, vol. 141(C).
    12. Ruixin Wang & Wendun Wang, 2013. "Dress-up contest: a dark side of fiscal decentralization," Working Papers 2013/30, Institut d'Economia de Barcelona (IEB).
    13. Barankay, Iwan & Lockwood, Ben, 2007. "Decentralization and the productive efficiency of government: Evidence from Swiss cantons," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1197-1218, June.
    14. Bård Harstad, 2007. "Harmonization and Side Payments in Political Cooperation," American Economic Review, American Economic Association, vol. 97(3), pages 871-889, June.
    15. Feder, Christophe & Kataishi, Rodrigo Ezequiel, 2017. "Decentralization in Heterogeneous Regions: A Biased Technological Change Approach," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201703, University of Turin.
    16. Marco Alderighi & Christophe Feder, 2014. "Political competition, power allocation and welfare in unitary and federal systems," Working Paper series 23_14, Rimini Centre for Economic Analysis.
    17. Paula Salinas & Albert Solé-Ollé, 2009. "Evaluating the effects of decentralization on educational outcomes in Spain," Working Papers 2009/10, Institut d'Economia de Barcelona (IEB).
    18. Yang, Zhou, 2016. "Tax reform, fiscal decentralization, and regional economic growth: New evidence from China," Economic Modelling, Elsevier, vol. 59(C), pages 520-528.
    19. Francesco Porcelli, 2009. "Effects of fiscal decentralisation and electoral accountability efficiency evidence from the Italian health care sector," Working Papers 2009/29, Institut d'Economia de Barcelona (IEB).
    20. Sedmihradská Lucie, 2018. "Inter-Municipal Cooperation in the Czech Republic: A Public Finance Perspective," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 11(2), pages 153-170, December.
    21. Jeong, Dong Wook & Lee, Ho Jun & Cho, Sung Kyung, 2017. "Education decentralization, school resources, and student outcomes in Korea," International Journal of Educational Development, Elsevier, vol. 53(C), pages 12-27.
    22. Yushkov, Andrey, 2015. "Fiscal decentralization and regional economic growth: Theory, empirics, and the Russian experience," Russian Journal of Economics, Elsevier, vol. 1(4), pages 404-418.

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    More about this item

    Keywords

    Fiscal decentralization ; political economy ; local public goods;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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