EconPapers    
Economics at your fingertips  
 

Decentralized government and regional income insurance

Constance Smith ()

The Annals of Regional Science, 2004, vol. 38, issue 1, 173-187

Abstract: One advantage of a decentralized system of government is that it allows government expenditure and taxation to better suit local preferences for public goods. On the other hand, if income is uncertain, a centralized system that incorporates interregional transfers allows regions to share consumption risk associated with region-specific shocks. Previous studies have compared decentralized and centralized systems using single period models in which all shocks are effectively permanent. This paper shows that when output shocks are temporary, if local governments borrow in periods with negative shocks and save in periods with positive shocks, a decentralized regime can stabilize income as effectively as a centralized regime. When output shocks are both temporary and permanent, the tradeoff between decentralized and centralized regimes depends on the difference in preferences for the public good across regions, the probability that disturbances to output are temporary, and the degree to which shocks are correlated across regions. Copyright Springer-Verlag 2004

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1007/s00168-003-0136-y (text/html)
Access to full text is restricted to subscribers.

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:spr:anresc:v:38:y:2004:i:1:p:173-187

Ordering information: This journal article can be ordered from
http://link.springer.com/journal/168

Access Statistics for this article

The Annals of Regional Science is currently edited by Martin Andersson, E. Kim and Janet E. Kohlhase

More articles in The Annals of Regional Science from Springer, Western Regional Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-11-06
Handle: RePEc:spr:anresc:v:38:y:2004:i:1:p:173-187