Government and Cities: Contests and the Decentralization of Decision Making
30 Pages Posted: 30 Aug 2002
Date Written: August 2002
Governments do not have perfect information regarding the priorities and the needs of different groups in the economy. This lack of knowledge opens the door for different groups to lobby the government in order to receive the government's support. We set up a model of hierarchical contests and compare the implications of a centralized allocation process with a decentralized allocation process. We show the potential existence of a poverty trap as a result of fiscal federalism.
Keywords: Fiscal Federalism, Economic Models of Political Processes, Contests, Rentseeking, Intergovernmental Relations, Interjurisdictional Differentials and Their Effects
JEL Classification: H77, D72, H73
Suggested Citation: Suggested Citation