Fiscal Decentralization in Specific Areas of Government. A Technical Note

Leonardo Letelier S. () and José Luis Sáez Lozano ()
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Leonardo Letelier S.: Senior Lecturer, Institute of Public Affairs, University of Chile. Santiago de Chile.
José Luis Sáez Lozano: Associate Professor, Department of International and Spain’s Economics (tenured), University of Granada. Granada, Spain.

Economía Mexicana NUEVA ÉPOCA, 2013, vol. XXII, issue 2, 357-373

Abstract: This study makes a contribution in two basic areas. First, it sets up a model which combines efficiency as well as political economy aspects in explaining the degree of fiscal decentralization. It innovates in making explicit the benefits from better informed politicians and policy makers (Von Hayek effect) and the potential cost push effect on public services and public goods (Scale Effect) resulting from decentralization. It takes advantage of previous literature in recognizing the extent of the ideological distance between the local and the national median voter as a third factor worth considering in the social cost benefit analysis of decentralization. Second, the aforementioned effects are put into the context of specific functional areas of government, each of them having a particular set of characteristics which lead to a different degree of decentralization. The net outcome will be the result of combining the rent seeking orientation of the central government with the particular median voter demand for each different public good.

Keywords: political economy; median voter; fiscal federalism; decentralization. (search for similar items in EconPapers)
JEL-codes: D72 H11 H71 H77 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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