Why does Centralisation fail to internalise Policy Externalities?

Robert Dur and Hein J. Roelfsema (h.j.roelfsema@econ.uu.nl)
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Hein J. Roelfsema: Utrecht University

No 02-056/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We provide an explanation why centralisation of political decision makingresults in overspending in some policy domains, whereas too low spending persists in others.We study a model in which delegates from jurisdictions bargain over local public goods provision.If all of the costs of public goods are shared through a common budget, policy makersdelegate bargaining to ‘public good lovers’, resulting in overprovision of public goods. If asufficiently large part of the costs can not be shared, underprovision persists because policymakers delegate bargaining to ‘conservatives’. We derive financing rules that eliminate theincentives for strategic delegation.

See publication in Public Choice , 2005, 122(3-4), 395-416.

Keywords: Centralised decision making; strategic delegation; financing rules. (search for similar items in EconPapers)
JEL-codes: D72 D78 H11 H41 (search for similar items in EconPapers)
Date: 2002-06-11, Revised 2003-11-11
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Journal Article: Why does centralisation fail to internalise policy externalities? (2005)
Working Paper: Why Does Centralisation Fail to Internalise Policy Externalities? (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20020056

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