Intergovernmental communication under decentralization

Shiyu Bo, Liuchun Deng, Yufeng Sun and Boqun Wang

Journal of Economic Behavior & Organization, 2021, vol. 184, issue C, 606-652

Abstract: We develop a model of inter-governmental communication to study the impact of decentralization on economic performance under an authoritarian regime. Decentralization shifts the decision power of policy-making from the central government to the local. The local government has the information advantage, but it also has the loyalty concern to follow the policy prescriptions from the central. We show that the loyalty concern impacts the economic outcome of decentralization by distorting both inter-governmental transmission of information and final policy-making. A strict adherence to the central renders decentralization welfare-reducing, causing low output and high volatility. Our model implications shed light on the history of decentralization reforms in the People’s Republic of China. A reinterpretation of our analytical framework also extends the core insights to representative democracies.

Keywords: Decentralization; Authoritarian regime; Output; Volatility; Communication; China (search for similar items in EconPapers)
JEL-codes: H10 H70 O50 P20 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268121000627
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:184:y:2021:i:c:p:606-652

DOI: 10.1016/j.jebo.2021.02.007

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().