Public Choice

, Volume 162, Issue 1–2, pp 25–42

Is there a local knowledge advantage in federations? Evidence from a natural experiment

Article

Abstract

In economics, the local knowledge advantage is arguably one of the key arguments in favor of decentralizing the public sector. However, empirical investigations of this particular effect have been scarce. This paper tests the existence of the local knowledge advantage in a real-world setting. Specifically, it looks at the variation in local knowledge across regions based on the origins and careers of regional politicians, assuming that politicians who have spent more time in a particular region possess more and better knowledge of that region than outsiders. To avoid the reverse causality problem, the paper investigates how local origins affected the performances of politicians in a ‘natural experimental’ environment, studying the responses of regional governors in Russia to disastrous forest fires in 2010. We confirm that local knowledge improves gubernatorial performance. In a highly centralized federation such as Russia, though, the effect is dependent on access to federal resources obtainable through close ties to the federal center. We also discuss alternative interpretations of the local origins of politicians and test whether the effects found are indeed more plausibly explained by local knowledge.

Keywords

Decentralization Local knowledge Federal connections Exogenous shocks Russian regions 

JEL Classification

D73 H77 P26 

Supplementary material

11127_2014_187_MOESM1_ESM.pdf (1.1 mb)
Supplementary material 1 (PDF 1092 kb)
11127_2014_187_MOESM2_ESM.pdf (796 kb)
Supplementary material 2 (PDF 796 kb)

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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Frankfurt School of Finance and ManagementFrankfurt am MainGermany

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