Universität zu Köln

On the determinants of cooperative public good provision

Koppel, Oliver (2004) On the determinants of cooperative public good provision. PhD thesis, Universität zu Köln.

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    This dissertation aims at identifying determinants of cooperative public good provision in dynamic frameworks. We develop political economy based models of fiscal federalism and establish normative benchmarks as well as equilibrium predictions for both policy-making under a centralized and decentralized regime. In the tradition of Oates' (1972) seminal fiscal federalism treatise, our models analyze the regimes' pros and cons for various facets of institutional policy-making. Yet, placing emphasis on the dynamic structures of policy-making, we introduce guidelines for policy assignment to layers of a federal system in repeated game settings. The bottom line for this thesis is to analyze the impact of factors like public good spillovers, regional preference heterogeneity, and the number of federal member states on the regime-specific ability to yield efficient public good policies. Let us illustrate the thread of this dissertation. Chapter 2 starts with a representation of the genuine fiscal federalism framework à la Oates (1972). The literature survey in section 2.1 classifies and highlights some contributions that can be related to Oates' work. Section 2.2 illustrates the basic normative guidelines for policy assignment, for instance the celebrated decentralization theorem, in a formal framework. Chapter 3 introduces our political economy framework and analyzes the optimal assignment of spillover policies in an economy with 2 regions. Our static perspective (section 3.3) confirms the above-mentioned standard fiscal federalism result, in particular the positive correlation between spillovers and the optimal degree of centralization. Allowing for dynamic interaction, this very guideline for policy assignment is, though, reversed in section 3.4 as efficient public good policies are then easier to sustain under a decentralized (centralized) regime in case spillovers are large (small). Chapter 4 applies the framework of chapter 3 to a setting with interregional preference heterogeneity. As a major result, both regimes fail to yield efficiency-sustaining cooperation in the repeated game setting if the regional preferences for public goods differ substantially. Chapter 5 extends the basic framework to a n-region economy, thus enabling us to analyze the impact of federal enlargements on the prospects of attaining efficiency. Varying the degree of spillovers as well as the type of public good funding, we apply the extended basic framework to different problems of public good allocation. In each case, enlargements induce two countervailing effects on the ability to maintain efficiency in a federal legislature. Yet, cooperation necessarily breaks down in large legislatures whereas, at the same time, efficiency can be sustained at the decentral layer. At last, chapter 6 endogenizes the very impact of repeated interaction on cooperation by allowing for (political) decision makers that face strategy-contingent re-election probabilities. Concluding our determinants of efficient public good provision, we show that cooperation can, quite generally, be attained if politicians face a high likeliness of joint future interaction. Chapter 7 summarizes our results.

    Item Type: Thesis (PhD thesis)
    Koppel, Oliverkoppel@wiso.uni-koeln.de
    URN: urn:nbn:de:hbz:38-12109
    Subjects: Economics
    Uncontrolled Keywords:
    Fiskalföderalismus , Spieltheorie , wiederholte Spiele , öffentliche Güter , LegislaturGerman
    fiscal federalism , game theory , repeated games , public goods , legislaturesEnglish
    Faculty: Wirtschafts- u. Sozialwissenschaftliche Fakultät
    Divisions: Wirtschafts- u. Sozialwissenschaftliche Fakultät > Seminar für Finanzwissenschaft
    Language: English
    Date: 2004
    Date Type: Completion
    Date of oral exam: 01 July 2004
    Full Text Status: Public
    Date Deposited: 22 Jul 2004 11:56:53
    NameAcademic Title
    Kitterer, WolfgangProf. Dr.
    URI: http://kups.ub.uni-koeln.de/id/eprint/1210

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