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To Fragment or to Consolidate Jurisdictions: the Optimal Architecture of Government

Rui Baleiras ()

FEUNL Working Paper Series from Universidade Nova de Lisboa, Faculdade de Economia

Abstract: Fiscal decentralisation is a hot issue worldwide. Within the European Union, there are even opposing tendencies with respect to the assignment of responsibilities between government tiers. This is a textbook paper aiming to provide a pedagogic introduction to the economics of government formation. Government size and district boundaries are endogenously set. Through a unified diagrammatic framework, the paper stresses the impact many politico-economic factors are likely to exert upon those endogenous variables. The list includes heterogeneity in demand for and supply of local public goods, cost sharing, scale economies, interjurisdictional spillovers, mobility of consumer-voters, congestion degrees, governance costs, and second-best finance. The analysis thus provides a foundation for a vertical system of multifunction governments very much in the pioneering spirit of Mancur Olson and Wallace Oates.

Keywords: fiscal federalism; clubs; government size; correspondence principle; governance costs (search for similar items in EconPapers)
JEL-codes: D71 D72 H11 H41 H70 (search for similar items in EconPapers)
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:unl:unlfep:wp401

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