Government Decentralization as a Commitment

28 Pages Posted: 24 Jun 2014

See all articles by Mark Gradstein

Mark Gradstein

Ben-Gurion University of the Negev - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); World Bank - Development Research Group (DECRG)

Date Written: May 23, 2014

Abstract

In the past several decades, many countries, among them non-democratic, chose to decentralize their governments. Building on insights provided by the “second generation” wave of research on fiscal federalism, this paper proposes a unified model to account for this. The idea is that decentralization serves as a commitment device to ensure that ex post chose policies will reflect regional preferences, thereby boosting individual productive effort incentives. This theory may explain the decentralization process in China in 1980-1990s, as well as the fact that government decentralization is generally more prevalent in democracies.

Keywords: federalism, regional decentralization, non-democracies

JEL Classification: H100

Suggested Citation

Gradstein, Mark, Government Decentralization as a Commitment (May 23, 2014). CESifo Working Paper Series No. 4809, Available at SSRN: https://ssrn.com/abstract=2457851 or http://dx.doi.org/10.2139/ssrn.2457851

Mark Gradstein (Contact Author)

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