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Public Choice

, Volume 122, Issue 3–4, pp 395–416 | Cite as

Why does centralisation fail to internalise policy externalities?

  • Robert Dur
  • Hein Roelfsema
Article

Abstract

We provide an explanation why centralisation of political decision making results 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 makers delegate bargaining to ‘public good lovers’, resulting in overprovision of public goods. If a sufficiently large part of the costs can not be shared, underprovision persists because policy makers delegate bargaining to ‘conservatives’. We derive financing rules that eliminate the incentives for strategic delegation.

Keywords

Decision Making Policy Maker Public Good Public Finance Political Decision 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science + Business Media, Inc. 2005

Authors and Affiliations

  1. 1.Tinbergen Institute, Department of EconomicsErasmus University RotterdamRotterdamThe Netherlands
  2. 2.Utrecht School of EconomicsUtrecht UniversityThe Netherlands

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