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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26173
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| Title: | | Revisiting the decentralization theorem: on the role of externalities  |
| Authors: | | Koethenbuerger, Marko |
| Issue Date: | | 2007 |
| Series/Report no.: | | CESifo working paper 2128 |
| Abstract: | | The Decentralization Theorem (Oates, 1972) is central to the discussion of fiscal federalism. We revisit the role of consumption spillovers in evaluating the merits of (de)centralization. Unlike the general prediction, a higher degree of spillovers may reduce the difference in utility of centralization and decentralization. The non-monotonicity result relates to the difference in expenditures on public consumption. Provided decentralized choices yield higher levels of public expenditure, a rise in the amount of spillovers allows residents to enjoy larger gains in public consumption (and thereby utility) under decentralization relative to centralization. |
| Subjects: | | federalism decentralization theorem externality policy uniformity |
| JEL: | | H10 H30 H70 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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