Sage Journals: Discover world-class research

Abstract

Under administrative federalism, the central state sets quality standards for public projects and the local jurisdictions decide which projects are carried out. Decentralized decisions suffer from an interjurisdictional spillover. The central state cannot distinguish between useful and useless projects. It is shown that administrative federalism is always preferable to decentralization. This is due to the distinction between the net benefit of increasing the quality level for all projects and the net benefit of carrying out an additional project. If the information problem is sufficiently important, administrative federalism also is preferable to centralization. Finally, it may even implement the first best solution.

Get full access to this article

View all access options for this article.

References

Caillaud, B. , B. Jullien , and P. Picard . 1996. Hierarchical organization and incentives. European Economic Review 40:687-695.

Calomiris, C. , and C. Himmelberg . 1994. Directed credit programs for agriculture and industry. Arguments from theory and fact. In Proceedings of the World Bank Annual Conference on Development Economics, 1993, edited by M. Bruno , 113-137. Washington, DC: International Bank for Reconstruction and Development.

Crémer, J. 1994. A theory of vertical integration based on monitoring costs. Discussion paper, Université des Sciences Sociales de Toulouse.

Crémer, J. , A. Eustache , and P. Seabright . 1996. Decentralizing public services: What can we learn from the theory of the firm? Revue d’économie politique 106:37-60.

De Bijl, P. 1995. Delegation of responsibility in organizations. Discussion paper, Center for Economic Research, Tilburg University.

Grote, F. 1995. Bau, Unterhaltung, Verkehr. In Straßenrecht, 5th ed., edited by K. Kodal and H. Krämer , 1202-1278. München: Beck.

Holmström, B. 1984. On the theory of delegation. In Bayesian models in economic theory, edited by M. Boyer and R. Kihlstrom , 115-141. Amsterdam: North-Holland.

Homburg, S. 1996. Ursachen und Wirkungen eines zwischenstaatlichen Finanzausgleichs. In Fiskalföderalismus in Europa, edited by A. Oberhauser, 61-95. Schriftenreihe des Vereins für Socialpolitik, Neue Folge 253. Berlin: Duncker &! Humblot.

Kloepfer, M., and K. Meßerschmidt. 1989. Umweltrecht. München: Beck.

10.

Krämer, H. 1995. Einführung: Die Straßenplanung im System der öffentlichen Planungen. In Straßenrecht, 5th ed., edited by K. Kodal and H. Krämer, 877-92. München: Beck

11.

Laffont, J. , and J. Tirole . 1993. A theory of incentives in procurement and regulation. Cambridge and London: MIT Press.

12.

Oates, W. 1972. Fiscal federalism. New York: Harcourt Brace Jovanovich.

13.

Oates, W. 1991. Fiscal federalism: An overview. In Public finance with several levels of government, edited by R. Prud’homme , 1-18. The Hague: Foundation of Public Finance.

14.

Rubinfeld, D. 1987. The economicso f the local public sector. In Handbook of public economics, vol. 2, edited by J. Auerbach and M. Feldstein , 571-645. Amsterdam: North-Holland.

15.

Statistisches Bundesamt. 1995. Statistisches Jahrbuch für die Bundesrepublik Deutschland. Stuttgart: Metzler-Poeschel.

16.

Vaubel, R. 1994. The public choice analysis of European integration: A survey. European Journal of Political Economy 10:227-249.

17.

Wildasin, D. 1986. Urban public finance. Chur, Switzerland: Harwood.

The Theory of Administrative Federalism: An Alternative to Fiscal Centralization and Decentralization

Abstract

Get full access to this article

References