Cognition, Incentives, and Public Governance

Giampaolo Garzarelli

Public Finance Review, 2006, vol. 34, issue 3, 235-257

Abstract: The second-generation theory (SGT) of fiscal federalism, which draws upon contemporary economic and industrial organization theory, hitherto focuses only on the negative benefits of public decentralization: the potentially superior ability to align perverse incentives vis-Ã -vis the centralized governance alternative. The SGT neglects the positive benefits of decentralization (mistake-ridden learning, flexibility, and option discovery), although the limitations of organization theory do not justify such neglect. By likening intergovernmental grants to incomplete contracts, this work shows that the SGT can include the laboratory nature of decentralization.

Keywords: experimentation; incomplete contracts; intergovernmental grants; learning; second-generation theory of fiscal federalism (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:34:y:2006:i:3:p:235-257

DOI: 10.1177/1091142105285593

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