Would Less Solidarity Justify Present Calls for Devolution?

Rosella Levaggi, Francesco Menoncin
2015 Social Science Research Network  
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 ecient. We model a local public good with spillovers in a framework in which devolution is socially inecient. Nevertheless, we show that the decentralized solution may be preferred by the richer regions if it implies a reduction in solidarity. We dene a threshold for regional income disparity
more » ... ncome disparity above which claims for more devolution may be driven by a reduction in solidarity. Finally, the relative strength of this eect is computed for a sample of countries.
doi:10.2139/ssrn.2669340 fatcat:th5prm4zkrbcxjdlw6fcwpv5je