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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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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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  1. 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.
  2. Etro, Federico & Ageloni, Ignazio & Alesina, Alberto, 2005. "International Unions," Scholarly Articles 4553008, Harvard University Department of Economics.
  3. Cremer, J. & Palfrey, T.R., 1994. "In or Out?: Centralization by Majority Vote," Papers 94.335, Toulouse - GREMAQ.
  4. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2001. "The Political Economy of International Unions," NBER Working Papers 8645, National Bureau of Economic Research, Inc.
  5. Timothy Besley & Michael Smart, 2005. "Fiscal Restraints and Voter Welfare," STICERD - Political Economy and Public Policy Paper Series 06, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  6. Jeremy Edwards & Michael Keen, 1994. "Tax competition and Leviathon," IFS Working Papers W94/07, Institute for Fiscal Studies.
  7. BELLEFLAMME, Paul & HINDRIKS, Jean, 2002. "Yardstick competition and political agency problems," CORE Discussion Papers 2002029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. 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.
  9. 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.
  10. J. Vernon Henderson & Ari Kuncoro, 2004. "Corruption in Indonesia," NBER Working Papers 10674, National Bureau of Economic Research, Inc.
  11. Buchanan, James M, 1987. "The Constitution of Economic Policy," American Economic Review, American Economic Association, vol. 77(3), pages 243-50, June.
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