Decentralization as an incentive scheme when regional differences are large

Pierre Salmon

LEG - Document de travail - Economie from LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne

Abstract: It has been suggested that large regional differences could be an obstacle to that part of the political accountability of office-holders which is based on yardstick competition among governments. The paper addresses that question and concludes that the obstacle is not too serious in general. The second part of the paper is devoted to the persistent economic underperformance of some regions in countries such as Germany, Italy and (with regard to regions overseas) France. How is it that the mechanism of yardstick competition induces a convergence of economic performance among European Union member countries, even those particularly poor initially, but fails to induce all the underperforming regions of these countries to catch up? A small model is used to explore that question. In the case of the persistently underperforming regions, it turns out that the degree of regional differentiation is not sufficient for yardstick competition to work and bring about an improvement in performance. The yardstick competition framework remains useful if it helps to understand more clearly why this is so.

Keywords: yardstick competition; political competition; regional development (search for similar items in EconPapers)
JEL-codes: D72 H70 R11 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-10
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Citations: View citations in EconPapers (1)

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Working Paper: Decentralization as an incentive scheme when regional differences are large (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:lat:legeco:e2009-13

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