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Constitutional Design and Regional Favoritism

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  • Wilfried Zantman

Abstract

Using a principal‐agent framework, this paper analyzes a public good provision problem in which a central government tries to favor one of the regions for political reasons. We show how this favoritism leads to some distortions of the allocation scheme compared to the benevolent case. We then study the effects of decentralization, modeled here by giving an outside option to the minority region. We exhibit a trade‐off between rent and equality and study the allocative and redistributive effects of a decentralized setting.

Suggested Citation

  • Wilfried Zantman, 2002. "Constitutional Design and Regional Favoritism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(1), pages 71-93, January.
    • Handle: RePEc:bla:jpbect:v:4:y:2002:i:1:p:71-93
    DOI: 10.1111/1467-9779.00089
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    Cited by:

    1. Donna Harris & Benedikt Herrmann & Andreas Kontoleon, 2009. "Two's Company, Three's a Group: The impact of group identity and group size on in-group favouritism," Environmental Economy and Policy Research Working Papers 41.2009, University of Cambridge, Department of Land Economics, revised 2009.
    2. Neil Rickman & Robert Witt, 2008. "Favouritism and Financial Incentives: A Natural Experiment," Economica, London School of Economics and Political Science, vol. 75(298), pages 296-309, May.
    3. Florence Lachet-Touya, 2012. "Les interactions fiscales verticales à la lumière de la théorie des multiprincipaux," Recherches économiques de Louvain, De Boeck Université, vol. 78(1), pages 27-46.
    4. Donna Harris & Benedikt Herrmann & Andreas Kontoleon, 2012. "When to Favour Your Own group? The Threats of Costly Punishments and In-group Favouritism," Economics Series Working Papers 628, University of Oxford, Department of Economics.
    5. Rubinchik-Pessach, Anna, 2005. "Can decentralization be beneficial?," Journal of Public Economics, Elsevier, vol. 89(7), pages 1231-1249, July.

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