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Would less solidarity justify present calls for devolution?

Author

Listed:
  • Rosella Levaggi

    (Università di Brescia)

  • Francesco Menoncin

    (Università di Brescia)

Abstract
In this study, we argue that the rules set by a central government to allocate interregional equalization grants may induce richer regions to ask for devolution, even when centralized provision is more efficient. We model a local public good with spillovers in a framework in which devolution is socially inefficient. Nevertheless, we show that the de- centralized solution may be preferred by the richer regions if it implies a reduction in solidarity. We define a threshold for regional income disparity above which claims for more devolution may be driven by a reduction in solidarity. Finally, the relative strength of this effect is computed for a sample of countries.

Suggested Citation

  • Rosella Levaggi & Francesco Menoncin, 2015. "Would less solidarity justify present calls for devolution?," Working papers 32, Società Italiana di Economia Pubblica.
    • Handle: RePEc:ipu:wpaper:32
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    devolution; equalization grant; regional income distribution;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H4 - Public Economics - - Publicly Provided Goods

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