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Strategic Decentralization and the Provision of Global Public Goods

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  • Foucart, Renaud

    (Humboldt University Berlin)

  • Wan, Cheng

    (Shanghai University of Finance and Economics)

Abstract

We study strategic decentralization in the provision of a global public good. A federation, with the aim of maximizing the aggregate utility of its members, may find it advantageous to decentralize the decision-making, so that its members act autonomously to maximize their own utility. If utility is fully transferable within a federation, the larger a federation is or the more sensitive it is to the public good, the more it has incentives to remain centralized. If an overall increase in the sensitivity to the public good induces some federation(s) to decentralize, it may lead to a decrease in the aggregate provision. With non-transferable utility within a federation, those members that are smaller or less sensitive to the public good are more likely to prefer decentralization. Some members within a federation becoming more sensitive to the public good may thus lead to a lower aggregate provision, because the increased heterogeneity of the federation makes it more inclined to decentralize.

Suggested Citation

  • Foucart, Renaud & Wan, Cheng, 2018. "Strategic Decentralization and the Provision of Global Public Goods," Rationality and Competition Discussion Paper Series 65, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:65
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    3. Klaus Eisenack, 2023. "Why local governments set climate targets: Effects of city size and political costs," Berlin School of Economics Discussion Papers 0029, Berlin School of Economics.

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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