Would less solidarity justify present calls for devolution?

Rosella Levaggi and Francesco Menoncin ()

Working papers from Società Italiana di Economia Pubblica

Abstract: In this study, we argue that the rules set by a central government to allocate interregional equalization grants may induce richer regions to ask for devolution, even when centralized provision is more efficient. We model a local public good with spillovers in a framework in which devolution is socially inefficient. Nevertheless, we show that the de- centralized solution may be preferred by the richer regions if it implies a reduction in solidarity. We define a threshold for regional income disparity above which claims for more devolution may be driven by a reduction in solidarity. Finally, the relative strength of this effect is computed for a sample of countries.

Keywords: devolution; equalization grant; regional income distribution (search for similar items in EconPapers)
JEL-codes: H4 H7 (search for similar items in EconPapers)
Date: 2015-10
New Economics Papers: this item is included in nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:ipu:wpaper:32

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