Vertical integration, technological choice and foreclosure

Eric Avenel

No 2000031, Discussion Papers (REL - Recherches Economiques de Louvain) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This article examines why, and how, fiscal decentralization could increase the economic growth rate (the hypothesis is predatory, or "corrupt", govemments). Searching for the optimal level of decentralization, the article first investigates the effects of an horizontal partition of the political power. Two effects will compete : a positive effect due to "proximity" and a negative effect linked to "coordination failures" (for raisons of externalities, small independent régions failed to implement a sufficient level of public spending). Then, the analysis seems to provide a theory of frontiers. But the article also shows that the intervention of a super-center (even corrupted), which centralizes taxes and decentralizes spending, should realize a higher growth rate. In that way, "federalism", which rather is a vertical partition of the political power, is the optimal rule.

JEL-codes: L12 L22 (search for similar items in EconPapers)
Pages: 14
Date: 2000-09-01
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvre:2000031

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