Optimal Degree Of Decentralization Research Articles

Asymmetric decentralization: distortions and opportunities

This paper studies the interplay between central and local governments in defining the optimal degree of decentralization in terms of public goods supply. The choice between full centralization and asymmetric decentralization implies a trade-off between the possibility to provide public goods at a lower cost, wherever this is possible by decentralizing, and the possibility to fully internalize spillovers by full centralization. We find that asymmetric decentralization introduces distortions into the public decision-making process. We also demonstrate that the power to interfere in the central government’s ruling mechanisms should be reduced for the jurisdictions that have decentralized, in order to make their decentralization choice convenient even for the citizens in the less efficient jurisdictions. Finally, we find the conditions under which asymmetric decentralization can be simultaneously advantageous for both rich and poor regions through the design of appropriate equalization transfers.

Resource-Saving Method of Forming Information Infrastructure of Sorting Stations

The paper proposes a resource-saving method of conceptual design of the information infrastructure of railway objects on the example of a distributed computer control system of a marshalling yard. This method allows determining the economically optimal degree of decentralization of the technical structure of the management system.

Government size, decentralization and growth: empirical evidence from Italian regions

ABSTRACT The aim of this study is to empirically assess the relationship among government size, decentralization and economic growth in Italian ordinary regions. The empirical analysis, based on a panel dataset on Italian regions, provides evidence in support of the existence of an inverted U-shaped relationship between public expenditure and economic growth, that depends on the degree of fiscal decentralization. In particular, according to our estimates on the specific Italian case, the optimal degree of decentralization is around 32%, while the optimal government size value is approximately 52%.

Waste Disposal and Decentralisation: A Welfare Approach

Since the seminal work of Oates (1972) on fiscal federalism, a central question of public finance has been which level of a federation should be assigned the provision of public goods. In this paper we study the problem of a government that is to choose the optimal centralization/decentralization mechanism for the final treatment of municipal solid waste. We analyze incentives, equilibria and implications of the governance framework for the disposal of waste. The key decisions revolve around the mobility of waste and the externalities (pollution) associated with its disposal, be it incineration or landfill. Moreover, if the Regions are characterized by different levels of efficiency in the processes they apply to the final treatment of waste, in theory a certain degree of waste mobility across regions should allow to reap the benefits of higher efficiency. On the other hand, as transportation and other environmental costs implied by mobility and concentration are significant, a trade-off emerges. Our model evaluates the implications of that trade-off for the optimal degree of decentralization in waste management.

On the Design of Hierarchies: Coordination Versus Specialization

We develop a model of hierarchies based on the allocation of authority. A firm's owners have ultimate authority over a firm's decisions, but they have limited time or capacity to exercise this authority. Hence owners must delegate authority to subordinates. However, these subordinates also have limited time or capacity and so further delegation must occur. We analyze the optimal chain of command given that different agents have different tasks: some agents are engaged in coordination and others in specialization. Our theory throws light on the nature of hierarchy, the optimal degree of decentralization, and the boundaries of the firm.

Intertemporal common agency and organizational design: How much decentralization?

In common agency, where one agent contracts with several principals, to what extent should the principals cooperate and centralize provision of incentives? If the agency is over contract complements — where an increase in activity for one principal increases the marginal value of contracting with other principals — complete centralization seems optimal, since this internalizes all externalities. We show that this intuition is not generally valid for dynamic agency situations. For although centralization provides more accurate incentives to the agent, it also aggravates the ratchet effect, and this negative effect may dominate. The optimal degree of decentralization is discussed and partly characterized.