Would less regional income distribution justify the present call for devolution?

Abstract

We model a local public good with spillovers, in a framework where devolution is socially inefficient. Nevertheless, we show that decentralisation may be preferred by one region if it implies a reduction in regional income redistribution. This result is due to the inter-regional mechanism of the equalisation grant. For an expenditure-based grant, we define a threshold for regional income disparity above which decentralisation is preferred, while for a resource-based grant the threshold depends on the spillover and the difference in preferences for the local public good. Finally, for given levels of regional income disparity we show which grant form may minimise the claims for decentralisation

Efficiency and equity effects of healthcare decentralization: evidence from Italy

“…Therefore, the comparative advantages of decentralization depend on the information the agents possess; for instance, about specific parameters (Levaggi and Smith, 1994;Snoddon and Wen, 2003;Akai and Mikami, 2006;Levaggi and Levaggi, 2016). Finally, the demand for decentralization may itself depend on the choice of the instruments the regulator is using to reduce horizontal fiscal imbalance (Levaggi and Menoncin, 2017).…”