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Fiscal Decentralization in Specific Areas of Government. A Technical Note

Author

Listed:
  • Leonardo Letelier S.

    (Senior Lecturer, Institute of Public Affairs, University of Chile. Santiago de Chile.)

  • José Luis Sáez Lozano

    (Associate Professor, Department of International and Spain’s Economics (tenured), University of Granada. Granada, Spain.)

Abstract

This study makes a contribution in two basic areas. First, it sets up a model which combines efficiency as well as political economy aspects in explaining the degree of fiscal decentralization. It innovates in making explicit the benefits from better informed politicians and policy makers (Von Hayek effect) and the potential cost push effect on public services and public goods (Scale Effect) resulting from decentralization. It takes advantage of previous literature in recognizing the extent of the ideological distance between the local and the national median voter as a third factor worth considering in the social cost benefit analysis of decentralization. Second, the aforementioned effects are put into the context of specific functional areas of government, each of them having a particular set of characteristics which lead to a different degree of decentralization. The net outcome will be the result of combining the rent seeking orientation of the central government with the particular median voter demand for each different public good.

Suggested Citation

  • Leonardo Letelier S. & José Luis Sáez Lozano, 2013. "Fiscal Decentralization in Specific Areas of Government. A Technical Note," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 357-373, July-Dece.
    • Handle: RePEc:emc:ecomex:v:22:y:2013:i:2:p:357-373
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    File URL: http://www.economiamexicana.cide.edu/num_anteriores/XXII-2/05-EM_Leonardo_Letelier.pdf
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    political economy; median voter; fiscal federalism; decentralization.;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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