Publication detail

Inefficient centralization of imperfect complements

Author(s): doc. PhDr. Martin Gregor Ph.D.,
PhDr. Lenka Šťastná Ph.D.,
Type: IES Working Papers
Year: 2007
Number: 19
Published in: IES Working Papers 2007/19
Publishing place: Prague
Keywords: centralization, public goods, strategic delegation, weakest-link, voluntary transfers
JEL codes: C72, D72, H40, H70, H73
Suggested Citation: Gregor, M., Gregorová, L. (2007). “ Inefficient centralization of imperfect complements. ” IES Working Paper 19/2007. IES FSV. Charles University.
Grants: IES Research Framework Institutional task (2005-2011) Integration of the Czech economy into European union and its development
Abstract: If local public goods exhibit spillovers and regions are sufficiently symmetric, decentralization implies underprovision, whereas cooperative centralization is associated with strict Pareto-improvement. This classic inference rests on two assumptions: local politicians are delegated sincerely and never provide voluntary transfers to the other regions. We abandon these assumptions in a setup of two symmetric regions with imperfect complementarity between local public goods. For this particular aggregation, non-cooperative decentralization can achieve the social optimum, whereas cooperative centralization cannot.
Downloadable: WP 2007_19 Gregor




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