Sharing a government

Jaume Ventura ()
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Jaume Ventura: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3418977

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper develops a simple theoretical framework to study a set of regions, each with its own regional government, who share a union or central government. These governments must decide whether to implement or discard a large number of projects that produce local beneÖts for the region that implements them, and externalities for the rest of the regions. Conáict or disagreement arises since di§erent regions value projects di§erently. The classic assignment problem consists of deciding who decides these projects, either the union or the regional governments. It is well known that regional governments are insensitive to externalities. The key observation here is that the union government is insensitive to local benefits. Thus, each government maximizes only a piece of the value of projects, and disregards the other one. This observations leads to simple and clear rules for solving the assignment problem.

Keywords: European integration; centralization and decentralization; public goods; externalities; fiscal federalism. (search for similar items in EconPapers)
JEL-codes: D72 D79 F15 F55 H77 (search for similar items in EconPapers)
Date: 2019-07
New Economics Papers: this item is included in nep-mic, nep-pol and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1664

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