Governance Choice on a Serial Network

Abstract:     
This paper analyzes governance choice in a two-level federation in providing road infrastructure across jurisdictions. Two models are proposed to predict the choice of centralized or decentralized spending structure on a serial road network shared by two districts. While the first model considers simple Pigouvian behavior of governments, the second explicitly models political forces at both a local and central level. Both models led to the conclusions that the spending structure is chosen based on a satisfactory comprise between benefits and costs associated with alternative decision-making processes, and that governance choice may spontaneously shift as the infrastructure improves temporally.

Number of Pages in PDF File: 24

Keywords: Governance choice, Transportation, Infrastructure, Fiscal federalism

JEL Classification: R48, R40, H54

Accepted Paper Series