Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26173
Authors: 
Koethenbuerger, Marko
Year of Publication: 
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

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