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Fiscal Decentralization: A Political Economy Perspective

  • Lockwood, Ben

    (University of Warwick and CEPR)

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.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp721.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 721.

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Length: 35 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:wrk:warwec:721
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Web page: http://www2.warwick.ac.uk/fac/soc/economics/

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  1. Ben Lockwood, 2004. "Decentralization via Federal and Unitary Referenda," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(1), pages 79-108, 02.
  2. Paul Belleflamme & Jean Hindriks, 2005. "Yardstick competition and political agency problems," Social Choice and Welfare, Springer, vol. 24(1), pages 155-169, 09.
  3. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2001. "The Political Economy of International Unions," Harvard Institute of Economic Research Working Papers 1939, Harvard - Institute of Economic Research.
  4. Etro, Federico & Ageloni, Ignazio & Alesina, Alberto, 2005. "International Unions," Scholarly Articles 4553008, Harvard University Department of Economics.
  5. J. Vernon Henderson & Ari Kuncoro, 2004. "Corruption in Indonesia," NBER Working Papers 10674, National Bureau of Economic Research, Inc.
  6. Timothy Besley & Michael Smart, 2005. "Fiscal restraints and voter welfare," LSE Research Online Documents on Economics 3769, London School of Economics and Political Science, LSE Library.
  7. Brian Knight, 2004. "Legislative Representation, Bargaining Power, and the Distribution of Federal Funds: Evidence from the U.S. Senate," NBER Working Papers 10385, National Bureau of Economic Research, Inc.
  8. Buchanan, James M., 1986. "The Constitution of Economic Policy," Nobel Prize in Economics documents 1986-1, Nobel Prize Committee.
  9. Crémer, Jacques & Palfrey, Thomas, 1994. "In or Out?: Centralization by Majority Vote," IDEI Working Papers 33, Institut d'Économie Industrielle (IDEI), Toulouse.
  10. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1027-56, November.
  11. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
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