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Show 13 that mimics the outcome in Brennan and Hamlin a perfectly competitive lucidly describe the workings market" (Oates 1999, of the model as p. 1124). follows: important because it offers citizens an exit option relative to government they face. Such an exit option is important both in itself and in relation to the incentives it creates for the behavior of political "managers." The mere fact that citizens of a jurisdiction can exit will, under plausible circumstances, set limits on the extent to which these citizens can be exploited. If jurisdictional governors choose random policy combinations, for example, residents faced with particularly bad outcomes can exercise their right of moving to another jurisdiction where the policy outcome is preferable-and the exercising of such mobility rights will be of lower cost by virtue of a federal structure. This lower cost exit option will be valuable even if its existence includes no supply-responses. But if residents are bearers of net taxable capacity and if jurisdictional governors derive any share of total rents (or if esteem of office is positively related to jurisdictional size), then jurisdictions may actively compete for residents and be led, like genuinely competitive firms, as if by an invisible hand, to offer policy packages that are attractive to their residents. Or at least this would be so if all residents were equally mobile. (Brennan and Hamlin 2000, pp. 266-267) Mobility is the In short, there is a well-developed enhancing argument of decentralization theoretical framework for the and fiscal federalism. As noted above, the strongest theoretical arguments for decentralization efficiency. This developed countries. argument has not Distributional of developing are the gains from allocative argument has been effectively used in the decentralization drive of Developing countries are, however, different and the strongly appealed to them, although it is still of the economic argument for decentralization. from those of efficiency- developed countries, concerns and and so political stability countries want to section reviews the literature adopt on a an important component Their economic conditions are the are two of the main driving forces efficiency are different for decentralization. reasons a large majority decentralized system of government. The next the distributional aspects of decentralization and its |
