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 |
| ISSN / ISBN: | |
| 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 |
