Centralized versus Decentralized Provision of Local Public Goods: a Political Economy Analysis

Timothy Besley and Stephen Coate

No 2495, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper takes a fresh look at the trade-off between centralized and decentralized provision of local public goods. The point of departure is to model a centralized system as one in which public spending is financed by general taxation, but districts can receive different levels of local public goods. In a world of benevolent governments, the disadvantages of centralization stressed in the existing literature disappear, suggesting that the case for decentralization must be driven by political economy considerations. Our political economy analysis assumes that under decentralization public goods are selected by locally elected representatives, while under a centralized system policy choices are determined by a legislature consisting of elected representatives from each district. We then study the role of taste heterogeneity, spillovers and legislative behaviour in determining the case for centralization.

Keywords: Decentralization; Local public goods; Distributive politics (search for similar items in EconPapers)
JEL-codes: H40 H70 P51 (search for similar items in EconPapers)
Date: 2000-07
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Citations: View citations in EconPapers (31)

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Working Paper: Centralized versus Decentralized Provision of Local Public Goods: A Political Economy Analysis (1999)
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