Decentralized Government and Macroeconomic Control [chapter]

Paul Bernd Spahn
1998 The Welfare State, Public Investment, and Growth  
There is wide agreement that decentralized government can improve the allocation of public resources by bringing decision making closer to consumers and by enhancing the accountability of public officials and bureaucrats. However, multiple layers of government can cause problems for national macroeconomic control. This is because local accountability does not only imply decentralized decision-making; it typically entails financial competencies as well-together with the right to borrow for
more » ... to borrow for lower-level authorities. Uncontrolled access to capital markets and mismanagement of budgets by local government could thus jeopardize macroeconomic stability and a case can be made for centralizing the stabilization function. This note discusses problems of macroeconomic control under decentralized government from a theoretical point of view. It concludes that the decentralization of public functions is not necessarily at variance with stabilization objectives.
doi:10.1007/978-4-431-67939-4_8 fatcat:rfwlfk23knd7jij3isxf4woaoq