The Hierarchy of Public Governance: Resource Allocation vs Bureaucratic Inefficiency
Hong Kong University of Science & Technology - Department of Economics
Penn State University - Department of Economics
Should a social program be run at a higher or lower level of government? We consider a government-run program supplying a private good to consumers. We focus on a tradeoff between the advantage of a high level of government in resource allocation and its disadvantage in consumer information. We look into the effect of differences in income levels, marginal costs and preferences on the architecture of public governance. One general conclusion is that, when regional differences are large, the central government should be in charge; otherwise, local governments should be in charge.
Number of Pages in PDF File: 39
Keywords: Public Governance, Government Hierarchy, Resource Allocation, Bureaucratic Inefficiency
JEL Classification: H1, H4, H7working papers series
Date posted: September 29, 2007
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