Journal Article

The political economy of (De)centralization with complementary public goods

Cheikbossian, Guillaume

2016

Overview

This paper provides a political economy analysis of (de)centralization when local public goods—with spillovers effects—can be substitutes or complements. Depending on the degree of complementarity between local public goods, median voters strategically delegate policy to either 'conservative' or to 'liberal' representatives under decentralized decision-making. In the first case, it accentuates the free-rider problem in public good provision, while it mitigates it in the second case. Under centralized decision-making, the process of strategic delegation results in either too low or too much public spending, with the outcome crucially depending on the sharing of the costs of local public spending relative to the size of the spillover effects. Hence, with a common financing rule, centralization is welfare improving if and only if both public good externalities and the degree of complementarity between local public goods are both relatively large.

• Publisher: Springer,Springer Berlin Heidelberg,Springer Nature B.V,Springer Verlag
• Subject: Central government / Centralization / Complementarity / Consumption / Cost sharing / Decentralization / Decision making / Delegation / Economic analysis / Economic Theory/Quantitative Economics/Mathematical Methods / Economics / Economics and Finance / Financial support / Game Theory / Government spending / Humanities and Social Sciences / International Political Economy / Investment strategies / Legislatures / Liberalism / Median voter / Municipal taxes / Nash equilibrium / Original Paper / Political economy / Politics / Public expenditure / Public Finance / Public good / Public goods / Public investments / Sales strategies / Social and Behav. Sciences / Social Policy / Spending / Spillover effect / Studies / Transnationalism / Voters / Welfare