The government's incentives to bail out inefficient projects are determined by the tradeoff between political benefits and economic costs, the latter depending on the decentralization of government. Two effects of federalism are derived: First, fiscal competition among local governments under factor mobility increases the opportunity costs of bailout and thus serves as a commitment device (the ...

abstract in this context, this article tries to presents a conceptual model of the factors affecting the government size and empirical test through econometric generalized methods of moments (gmm) by using data from 15 developing countries, review relationship between fiscal decentralization and the government size. the results of dynamic panel data indicate a positive effect of income and expe...

Excessive borrowing by subnational governments due to soft budget constraints and intergovernmental coordination failures might be one of the perils of decentralization. Despite a large body of case studies, empirical investigations on whether decentralization increases consolidated public debt levels are still scarce. This paper contributes to the literature by exploring econometrically for se...

vii 1. Why Should We Worry about Decentralization? 1 2. Decentralization: A Complex Phenomenon 4 Why Is Decentralization Happening? 4 What Is Decentralization? 4 What Are the Implications of Decentralization? 6 Successful Decentralization Depends on Institution-Specific Design 7 3. Designing Decentralization: The Building Blocks of Fiscal Federalism 10 Assigning Expenditure Responsibilities 10 ...

The relationship between decentralization of government activities and the extent of rent extraction by private parties is an important element in the recent debate on institutional design. The theoretical literature makes ambiguous predictions about this relationship, and it has remained virtually unexamined by empiricists. In this paper, we make a first attempt at examining this issue empiric...

What is the best arrangement of fiscal powers and responsibilities between the different levels of government? This is a question at the center of policy debate in countries around the world (Bird, 1993). It is not an issue restricted to big countries, as many believe. Though it is an important concern in China and the United States, it is also under study in Nicaragua and the Baltics. Nor is i...

The most important theoretical argument concerning decentralization is that it can improve governance by making government more accountable and responsive to the governed. Improving governance is also central to the motivations of real-world reformers, who bear risks and costs in the interest of devolution. But the literature has mostly focused instead on policy-relevant outcomes, such as educa...

The relationship between decentralization of government activities and the extent of rent extraction by private parties is an important element in the recent debate on institutional design. The theoretical literature makes ambiguous predictions about this relationship, and it has remained virtually unexamined by empiricists. In this paper, we make a first attempt at examining this issue empiric...

This paper revisits the fiscal "decentralization theorem", by relaxing the role of the assumption that governments are benevolent, while retaining the assumption of policy uniformity. If instead, decisions are made by direct majority voting, (i) centralization can welfare-dominate decentralization even if there are no externalities and regions are heterogenous; (ii) decentralization can welfare...