Government Decentralization as a Commitment

Mark Gradstein

No 4809, CESifo Working Paper Series from CESifo

Abstract: In the past several decades, many countries, among them non-democratic, chose to decentralize their governments. Building on insights provided by the “second generation” wave of research on fiscal federalism, this paper proposes a unified model to account for this. The idea is that decentralization serves as a commitment device to ensure that ex post chose policies will reflect regional preferences, thereby boosting individual productive effort incentives. This theory may explain the decentralization process in China in 1980-1990s, as well as the fact that government decentralization is generally more prevalent in democracies.

Keywords: federalism; regional decentralization; non-democracies (search for similar items in EconPapers)
JEL-codes: H10 (search for similar items in EconPapers)
Date: 2014
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