transfers in a polarized country bridging the gap between efficiency and stability we consider a political economy model of country whose citizens have heterogeneous preferences for a national policy and some regions may contemplate a threat of secession the country is efficient if its break up into smaller countries leads to aggregate utility loss we show that in an efficient country whose citizens preferences exhibit a high degree of polarization a threat of secession cannot be eliminated without interregional transfers we also demonstrate that if majority voting is used to determine the redistribution schemes within the country then a high degree of polarization yields the full compensation scheme as the unique political equilibrium

proprietary public finance and economic welfare abstract we develop a positive theory of public finance in which the objective of tax and spending policy is to extract rents for the incumbent ruler the analysis shows how dependence of the incumbent ruler s survival probability on his tax and spending policy can lower the equilibrium tax rate and increase the equilibrium amount of spending on productive public services but only until the minimum credible tax rate which depends on the ruler s endogenous survival probability becomes a binding constraint the central result of the analysis is that if a relatively benevolent tax and spending policy is both necessary and sufficient for a high survival probability then the ruler s equilibrium policy is relatively benevolent

the political economy of financial reform are abiad and mody right motivated by the questions financial reform what shakes it what shapes it raised by abiad and mody 2005 this paper studies the forces that induce governments to undertake financial sector reform rather than their ordered logit technique it uses a within groups approach allowing for error dependence across countries and over time this analysis shows that some of the am findings are not robust to error dependence and the estimation method it has shed new light on the political economy of financial reform copyright 2009 john wiley sons ltd

explaining regional autonomy differences in decentralized countries why do groups want to secede and where is demand for self determination most likely to arise we argue self determination demand is moderated by the projected economic costs of policy autonomy the trade off between income and sovereignty implies that other things being equal richer regions are more likely to demand more autonomy this trade off suggests that relative regional income is a key predictor of autonomy demands we show evidence of this using new data collected at the level of second tier administrative sub divisions in 48 decentralized countries consistent with a demand and supply model of self determination we find that levels of policy autonomy are positively correlated with relative regional income regional population share natural resource endowment and regional inter personal inequality ethnically distinct regions have lower sovereignty which could explain higher levels of conflict in these regions but this association is conditional on controlling for the interactive effects be

separation of powers and political accountability political constitutions are incomplete contracts and therefore leave room for abuse of power in democracies elections are the primary mechanism for disciplining public officials but they are not sufficient separation of powers between executive and legislative bodies also helps to prevent the abuse of power but only with appropriate checks and balances checks and balances work by creating a conflict of interest between the executive and the legislature yet requiring both bodies to agree on public policy in this way the two bodies discipline each other to the voters advantage under appropriate checks and balances separation of powers also helps the voters elicit information

the breakdown of hierarchies in the soviet union and china a neoinstitutional perspective why did modest attempts to decentralize the centrally administered soviet system lead to its collapse while more far reaching decentralization in china left central political and administrative hierarchies intact this article analyzes the disintegration of centrally planned organizations in the context of a neoinstitutional model of the breakdown of authority within hierarchies an agency model of hierarchy is presented that incorporates the ambiguous property rights authority relations and risk sharing conditions that prevailed under central planning and then persist during postcommunist transitions this model suggests that decentralizing reforms could trigger an organizational bank run prompting local agents to seize organizational assets under their control the article also considers reputation preserving strategies that central authorities might use to avert disintegration as an application of this model the collapse of soviet political industrial and state fiscal hierarchies are considered and compared with the experience of analogous sectors in china reforms in both states transferred significant autonomy from the center to local field agents in the soviet case these agents appropriated organizational assets with little interference from the center in china by contrast the center preserved both its capacity for monitoring and its reputation for disciplining transgressions and the rise of hybrid ownership forms made expropriation of state and party assets far less attractive

optimal taxation and fiscal constitution abstract assuming a world with excessive taxes the focuses of this paper are political mechanisms that ensure efficiency enhancing restraints on taxes in particular it is shown that supermajority requirements to approve tax increases as currently used in some us states is the means of attaining this objective their relationship to another such mechanism prevalent in earlier centuries that of franchise restrictions is discussed

a theory of political transitions we develop a theory of political transitions inspired by the experiences of western europe and latin america nondemocratic societies are controlled by a rich elite the initially disenfranchised poor can contest power by threatening revolution especially when the opportunity cost is low for example during recessions the threat of revolution may force the elite to democratize democracy may not consolidate because it is redistributive and so gives the elite an incentive to mount a coup highly unequal societies are less likely to consolidate democracy and may end up oscillating between regimes and suffer substantial fiscal volatility

transition costs in secessions with a brief application to scotland this article demonstrates that the costs incurred in the process of a region becoming a sovereign state can be large enough to outweigh the long term material benefits of independence transition costs consist of transaction costs fiscal costs and the cost of uncertainty their size depends crucially on whether the politics of the transition are cooperative game theory however shows that there are incentives for threats of non cooperation and for the exercise of such threats these considerations are applied briefly to the debate about scottish independence this includes a short analysis of how transition costs can be reduced a final section inquires about possible transition benefits which can consist of solidarity

the principle of convergence in wartime negotiations if war results from disagreement about relative strength then it ends when opponents learn enough about each other learning occurs when information is revealed by strategically manipulable negotiation behavior and nonmanipulable battlefield outcomes i present a model of simultaneous bargaining and fighting where both players can make offers and asymmetric information exists about the distribution of power in the markov perfect sequential equilibrium making and rejecting offers has informational value that outweighs the one provided by the battlefield however states use both sources of information to learn and settle before military victory the principle of convergence posits that warfare ceases to be useful when it loses its informational content and that belief in defeat victory is not necessary to terminate initiate hostilities thus the standard puzzle in international relations that seeks to account for prewar optimism on both sides may not be that relevant

regional income redistribution and risk sharing how does italy compare in europe abstract this paper investigates income redistribution and risk sharing and the underlying public policy in italy a country marked by stark regional economic contrasts unlike previous works this study also assesses the roles of public consumption investment and welfare assistance in kind the findings suggest that italy s fiscal system provides redistribution at 25 35 and risk sharing at 10 15 of gdp with public consumption playing a large role compared with results in the literature for other countries there appears to be less redistribution and risk sharing through italy s welfare and tax systems because of their different structures

cross border externalities and cooperation among representative democracies abstract this paper analyzes the provision of public goods with cross border externalities by representative democracies the level of provision of each country is decided by a policy maker elected by majority rule at the country level we compare the case in which policy makers set their policies noncooperatively with the case in which they set their policies through coasian cooperation cooperation induces policy makers to internalize cross border externalities but it also induces strategic voters to elect a policy maker who cares less about the public good to reduce their public good contribution the former effect increases public good provision while the latter reduces it we show that once voters incentives are taken into account whether cooperation is beneficial depends neither on voters preferences nor on the magnitude of spillovers nor on the size bargaining power or efficiency of each country instead it depends only on the curvature of the demand for the public good cooperation increases decreases public good provision when the demand function is more less convex than the unit elastic demand function hence the desirability of international cooperation depends mostly on the type of public good considered

african enclosures a default mode of development abstract this paper draws on recent empirical studies of changing land and water use in semi arid africa to identify socioeconomic and political dynamics and discusses their implications for current policy which emphasizes decentralization and the strengthening of local often customary land rights the paper presents cases where local initiative in response to market opportunities is driving investment and intensification of water use to increase production this trend is associated with an increase in individualized control and market relationships in access to land with increasing disadvantage to the poor it is argued that this default pattern of development is occurring irrespective of the formal system of land tenure and may be promoted rather than inhibited by policies of decentralizing natural resource management

rescaling governance and the impacts of political and environmental decentralization an introduction summary this article introduces a collection of papers that provide empirical studies of the impacts that result from changes to established modes of governance in particular decentralizing the scale at which state institutions operate or the privatization of service delivery we critically assess the claims made for good governance reforms in the light of these studies altering the scale and the style of governance has inevitable consequences for power structures institutions livelihoods and physical landscapes we offer a framework for analyzing these consequences focusing on the temporal and scale dimensions of political and environmental decentralization and changes to established modes of governance

secessionism and minority protection in an uncertain world abstract with the changing political and economic circumstances confronting their countries regionally concentrated minorities have been facing a strategic problem important aspects of which can be stylized as a situation in which a minority leader is uncertain about the costs of secession for her community this paper shows that this uncertainty is a central cause of secession using a model which incorporates both policies to appease secessionist aspirations and informational asymmetries in a situation of asymmetric information in which the policy maker is better informed about the consequences of separation than the minority leader signaling incentives make secession the unique equilibrium outcome whether mutually advantageous compromises exist or not we also show that the ruling majority may seek to maintain political unity by pre committing to minority protection rules which prevent bluffing by the informed policy maker additionally the model generates comparative statics results on the question of which states are most likely to adopt constitutional rules protecting the minorities living within their borders

the breakup of nations a political economy analysis this paper develops a model of the breakup or unification of nations in each nation the decision to separate is taken by majority voting a basic trade off between the efficiency gains of unification and the costs in terms of loss of control on political decisions is highlighted the model emphasizes political conflicts over redistribution policies the main results of the paper are i when income distributions vary across regions and the efficiency gains from unification are small separation occurs in equilibrium and ii when all factors of production are perfectly mobile all incentives for separation disappear i introduction following the demise of communism the entire map of europe from the atlantic coast to the urals is being redrawn and issues of separation unification and the redrawing of borders are yet again at the forefront of european concerns many of the issues raised by this process are primarily of a political cultural or linguistic nature however there are also economic considerations that bear on this problem the objective of this paper is to analyze some important economic and political determinants of the process of unification and separation of democratic nations the starting point of our analysis is to suppose that from an economic efficiency point of view separation of nations is never desirable a unified nation is always more efficient since free trade among regions is guaranteed duplication costs in defense and law enforcement are avoided and local public goods provision such as transportation and communication networks or common standards can be coordinated furthermore any benefits of decentralization that might be obtained in a world with several nations may also be achieved within a unified nation by replicating the administrative structure of the world with several

secession and value abstract a model with random proposals where secession of coalitions is the only threat yields exploitative allocations if proposals for coalition s involve randomization the responders pay off vector consists of shapley values for coalition sizes ranging from 1 to s 1

decentralization fueling the fire or dampening the flames of ethnic conflict and secessionism political decentralization is widely believed to reduce ethnic conflict and secessionism in the world today yet decentralization is more successful in reducing conflict and secessionism in some countries than in others in this article i explore why this difference occurs i demonstrate using a statistical analysis of thirty democracies from 1985 to 2000 that decentralization may decrease ethnic conflict and secessionism directly by bringing the government closer to the people and increasing opportunities to participate in government but that decentralization increases ethnic conflict and secessionism indirectly by encouraging the growth of regional parties regional parties increase ethnic conflict and secessionism by reinforcing ethnic and regional identities producing legislation that favors certain groups over others and mobilizing groups to engage in ethnic conflict and secessionism earlier versions of this article were presented at harvard university and the center for the study of democratic politics at princeton university the author would like to thank sandra alfonso leon james alt micah altman barry friedman shigeo hirano simon hug gary king rose rozaghian tulia falleti and two anonymous reviewers for their very helpful comments

distributional conflict and jurisdictional organization abstract this paper explores the endogenous formation of jurisdictions assuming the political process is a costly fight to acquire shares of the gnp pie in such a setting the stability of a unified jurisdiction is not necessarily determined by the preferences of the richest member region we also show that a system of federalism is especially significant in ameliorating distributional competition and conflict less resources are spent in aggregate on appropriative activities under a hierarchical system of federalism than in a unified jurisdiction with a single central government

balancing rural poverty reduction and citizen participation the contradictions of uganda s decentralization program abstract uganda s ambitious decentralization program is analyzed in terms of a dual mode system of local governance under a technocratic mode conditional funding from the center is earmarked for particular programs but with little local participation in contrast the patronage mode is an elaborate system for local bottom up planning but with limited resources which are largely consumed in administrative costs and political emoluments along with the spoils of a committee system controlling contracts and appointments these resources provide the means for building political alliances and loyalty in the absence of a culture of transparency and civic engagement to assure downward accountability it remains to be seen whether decentralization can promote both efficient service delivery and local empowerment simultaneously

the political economy of financial reform how robust are huang s findings using new data on financial liberalization taken from abiad et al 2008 imf working papers no 08 266 for 62 countries over the period 1975 2005 we show that some of the main findings of huang s 2009 journal of applied econometrics 24 1207 1213 replication study on the drivers of financial liberalization are not robust major changes concern the effect of democracy on financial reform and the supposed relationship between the desired level of financial liberalization and a country s per capita income copyright c 2012 john wiley sons ltd

rationalist explanations for war realist and other scholars commonly hold that rationally led states can and sometimes do fight when no peaceful bargains exist that both would prefer to war against this view i show that under very broad conditions there will exist negotiated settlements that genuinely rational states would mutually prefer to a risky and costly fight popular rationalist and realist explanations for war fail either to address or to explain adequately what would prevent leaders from locating a less costly bargain essentially just two mechanisms can resolve this puzzle on strictly rationalist terms the first turns on the fact that states have both private information about capabilities and resolve and the incentive to misrepresent it the second turns on the fact that in specific strategic contexts states may be unable credibly to commit to uphold a mutually preferable bargain historical examples suggest that both mechanisms are empirically plausible

secession and the limits of taxation toward a theory of internal exit comment the purpose of this note is to correct an error in the seminal article on secession by buchanan and faith 1987 in their paper buchanan and faith neglected an important effect political separation affects markets and consequently individual private incomes

decentralized targeting of an antipoverty program abstract developing country governments often delegate authority over the targeting of antipoverty programs to community organizations while retaining control over how much goes to each community we offer a theoretical characterization of the information structure in such programs and the interconnected behavior of the various players our model motivates an econometric specification for explaining distributional outcomes results for bangladesh s food for education ffe program indicate that within village targeting improved with program size lower land inequality less remoteness fewer shocks and less private redistribution there is no sign that the center took account of village attributes conducive to reaching the poor

decentralisation and supply efficiency the case of rural water supply in central india demand for decentralisation of provision of public services is gaining ground in developing countries also the policy advice to decentralise given by international agencies to the developing countries is turning into pressure however the benefits of decentralisation are not as obvious as the standard theory of fiscal federalism predicts this article examines the effect of decentralisation of provision of drinking water in central india the efficiency of water utilities under the control of the state government and those under the local governments is compared in terms of expense and asset utilisation it is found that the decentralised provision of water supply is less efficient the possible reasons for this counter intuitive result are analysed

externalities vs internalities a model of political integration abstract decentralized government leads to inter regional externalities whereas an integrated jurisdiction solves the externality problem centralized government entails other costs in particular a neglect for minority interests the paper models formally the trade off between these two forces in determining the optimum as well as the equilibrium design of jurisdictions both the relative size of regions and the distribution of tastes are shown to be important parameters of the problem

decentralisation and government provision of public goods the public health sector in uganda while many developing countries have devolved health care responsibilities to local governments in recent years no study has examined whether decentralisation actually leads to greater health sector allocative efficiency this paper approaches this question by modeling local government budgeting decisions under decentralisation the model leads to conclusions not all favourable to decentralisation and produces several testable hypotheses concerning local government spending choices for a brief empirical test of the model we look at data from uganda the data are of a type seldom available to researchers actual local government budgets for the health sector in a developing country the health budgets are disaggregated into specific types of activities based on a subjective characterisation of each activity s publicness the empirical results provide preliminary evidence that local government health planners are allocating declining proportions of their budgets to public goods activities

decentralized corruption or corrupt decentralization community monitoring of poverty alleviation schemes in eastern india democratic decentralization and community participation often stand at the center of an agenda of good governance that aims to reduce corruption and increase the state s accountability to its citizens however this paper suggests based on empirical studies on the employment assurance scheme in rural west bengal that the strength of upward accountability especially to political parties is as crucial as downward accountability to communities when these vertical accountabilities are weak horizontal accountability structures between local civil society and officials can mutate into networks of corruption in which community actors become accomplices or primary agents

blending top down federalism with bottom up engagement to reduce inequality in ethiopia donors increasingly fund interventions to counteract inequality in developing countries where they fear it can foment instability and undermine nation building efforts to succeed aid relies on the principle of upward accountability to donors but federalism shifts the accountability of subnational officials downward to regional and local voters what happens when aid agencies fund anti inequality programs in federal countries does federalism undermine aid does aid undermine federalism or can the political and fiscal relations that define a federal system resolve the contradiction internally this study explores this paradox via the promotion of basic services program in ethiopia the largest donor financed investment program in the world using an original panel database comprising the universe of ethiopian woredas districts the study finds that horizontal geographic inequality decreased substantially donor financed block grants to woredas increased the availability of primary education and health care services in the bottom 20 percent of woredas weaker evidence from household surveys suggests that vertical inequality across wealth groups within woredas also declined implying that individuals from the poorest households benefit disproportionately from increasing access to and utilization of such services the evidence suggests that by combining strong upward accountability over public investment with extensive citizen engagement on local issues ethiopia s federal system resolves the instrumental dissonance posed by aid funded programs to combat inequality in a federation

why did the west extend the franchise democracy inequality and growth in historical perspective during the nineteenth century most western societies extended voting rights a decision that led to unprecedented redistributive programs we argue that these political reforms can be viewed as strategic decisions by the political elite to prevent widespread social unrest and revolution political transition rather than redistribution under existing political institutions occurs because current transfers do not ensure future transfers while the extension of the franchise changes future political equilibria and acts as a commitment to redistribution our theory also offers a novel explanation for the kuznets curve in many western economies during this period with the fall in inequality following redistribution due to democratization i introduction the nineteenth century was a period of fundamental political reform and unprecedented changes in taxation and redistribution britain for example was transformed from an oligarchy run by an elite to a democracy the franchise was extended in 1832 and then again in 1867 and 1884 transferring voting rights to portions of the society with no previous political representation the decades after the political reforms witnessed radical social reforms increased taxation and the extension of education to the masses moreover as noted by kuznets inequality which was previously increasing started to decline during this period the gini coefficient for income inequality in england and wales had risen from 0 400 in 1823 to 0 627 in 1871 but fell to 0 443 in 1901 two key factors in the reduction in inequality were the increase in the proportion of skilled workers williamson 1985 and the redistribution of income toward the poorer segments of the society for example taxes rose from 8 12 percent of national product in 1867 to 18 8 percent by 1927 and the progressivity of the tax system increased substantially see lindert 1989

the tiebout model bring back the entrepreneurs several recent papers in the literature have reformulltlated the nature of equilibrium in ifiebout mo lels by alssliuim ing an exogenous number of communities inflexible commullity l ou alaries anti in pirticular inactive lantlowners and developers ihis paper argues that these assumptions are unwarranted and resul1t iin in eterminate solutions and incorrect analyses determinate lon1g run1 solutions require equilibrium in intercommui land markets which in turn require giving lantlowners and or entrepreneurial leveloelers an active role in the models the role of politics in these models and its juxtaposition with entrepreneurial activities are also analyzed

do crises induce reform a critical review of conception methodology and empirical evidence of the crisis hypothesis the notion that economic crises induce the adoption of reform ranks among the most widely accepted concepts in the political economics literature however the underlying mechanism of the so called crisis hypothesis has yet to be fully understood this paper provides a comprehensive survey of the relevant empirical evidence to date and scrutinizes the operationalization of the hypothesis key concepts crisis reform and the political mediation of reform during crises we argue that the social perception of both crises and the subsequent cost of reform requires consideration of how these concepts are operationalized as a product of the broader economic and institutional environment social perceptions largely determine the manner in which the political mediation of reform during crises works present day methodological approaches fail to adequately reflect social perceptions and consequently compromise the determination of what constitutes both crisis and the cost of reform in the context of the crisis hypothesis most notably the identification of crises by fixed thresholds constructed around macroeconomic variables impedes the interpretation of the hypothesis underlying mechanism a fuller treatment of social perception within the operationalization of the hypothesis key concepts can enhance our understanding of how economic crises influence political dynamics in bringing about reform

secessions and political extremism why regional referenda do not solve the problem this paper shows that an uninformed player can increase his bargaining power by committing to receive information from an expert more skeptical to cooperation this general idea is applied to a model in which a regional political leader the expert influences voting in a referendum on independence by strategically disseminating information about the consequences of separation i show that this motivates a moderate electorate to appoint a more extreme leader to receive biased information that increases their bargaining power over the gains of staying unified however a trade off between bargaining power and precision of information causes inefficient outcomes in equilibrium jel c73 d72 d82 h77

political bargaining in a federation buchanan meets coase abstract in recent decades the issues of federalism and political integration have gained prominence in public debate as well as in the academic realm a frequently made point is that allowing free secession may protect the minority s interests thus providing it with an incentive to enter the federation this paper explicitly considers the political process in the federation arguing that the option to secede may distort the political choices made by the individual regions to improve their bargaining positions as a result the allocation of resources in the federation could well end up being inefficient and unattractive for the minority region in contrast limiting the secession possibilities by requiring the consent of a majority of voters through a regional referendum rather than leaving it to the discretion of the legislature restores efficiency

a model of spoils politics accounts of state failure in the developing world frequently highlight a logic of spoils politics in which a government and an opposing faction vie for control of the state and the accompanying spoils attempts to buy the opposition off play a key role in this logic and an informational problem often complicates these efforts because of limited transparancy the government generally has a better idea about the actual size of the spoils than the opposition does we formalize this aspect of spoils politics as a signaling game in which the government has private information about the size of the spoils and tries to co opt the opposition by offering a share of the spoils the opposition can accept the offer or reject it by fighting consistent with the strong empirical finding that the probability of civil war is higher when income is low the probability of breakdown increases as the size of the spoils decreases we also study the effects of uncertainty the opposition s military strength the cost of fighting and power sharing agreements on the probability of fighting

right target wrong mechanism agricultural modernization and poverty reduction in uganda summary household consumption surveys suggest that the downward trend in rural poverty indicators recorded in uganda during the 1990s has been reversed since 2000 this paper examines the ugandan government s strategy to reduce rural poverty the plan for modernization of agriculture pma it argues that while there appear few better choices of target for the pma than to improve incomes of the rural poor through increased agricultural productivity emphasis on decentralization as a mechanism for poverty reduction is misplaced in the current political context of uganda the paper considers what alternative mechanisms might better deliver reductions in rural poverty

coordinated action in local public goods models the case of secession without exclusion abstract this paper investigates threats of coordinated exit secession when coalitions cannot choose their members by exclusion this is modeled by a three stage noncooperative game in which voters choose a proportional tax rate and the level of public services and may choose to exit jointly a modified perfectly coalition proof nash concept is applied to rule out dynamically inconsistent threats and behavior by coalitions that is not self enforcing the major result is that cooption of potential seceding coalitions will not occur this result relies on the assumption that seceding coalitions cannot exclude potential members

on the number and size of nations this paper studies the equilibrium determination of the number of countries in different political regimes and in different economic environments with more or less economic integration we focus on the trade off between the benefits of large jurisdictions and the costs of heterogeneity of large and diverse populations our model implies that i democratization leads to secessions ii in equilibrium one generally observes an inefficiently large number of countries iii the equilibrium number of countries is increasing in the amount of economic integration

making reform work institutions dispositions and the improving health of bangladesh we examine whether local governance can improve social development empirically using good and bad cases of public health outcomes in bangladesh we explore the institutional underpinnings of service provision digging down beneath the rules of the game to analyze the beliefs understandings and dispositions that drive social behavior changes in deep social attitudes led to improvements in social indicators regional variation in health outcomes is explained by the presence or absence of a dense web of relationships that enmeshed reformers in local systems of authority and legitimacy strengthening their actions and making local society more susceptible to change

government action social capital and development reviewing the evidence on synergy abstract instead of assuming a zero sum relationship between government involvement and private cooperative efforts the five preceding articles argue for the possibility of state society synergy that active government and mobilized communities can enhance each others developmental efforts this article draws on these articles to explore the forms and sources of state society synergy i argue that synergy usually combines complementarity with embeddedness and is most easily fostered in societies characterized by egalitarian social structures ard robust coherent state bureaucracies i also argue however that synergy is constructable even in the more adverse circumstances typical of third world countries

incentives for secession in the presence of mobile ethnic groups abstract this paper presents a model on secessions and nationalism with special emphasis on the role of imperfectly mobile ethnic minorities individuals trade off political benefits of homogeneity against economic costs from increasing returns to scale in production the main findings are i mobility decreases the political motivation for independence because increased competition for labour forces the ethnic majorities in the separating countries to accommodate their policy ii the impact of mobility depends on whether separation is politically or economically motivated iii increased mobility leads to a less accommodated policy in case of no separation

does decentralization increase government responsiveness to local needs evidence from bolivia this paper examines whether decentralization increases the responsiveness of public investment to local needs using a unique database from bolivia empirical tests show that investment patterns in human capital and social services changed significantly after decentralization these changes are strongly and positively related to objective indicators of need nationally these changes were driven by the smallest poorest municipalities investing devolved funds in their highest priority projects the findings contradict common claims that local government is too corrupt institutionally weak or prone to interest group capture to improve upon central government s allocation of public resources d 2002 published by elsevier b v

the inefficient use of power costly conflict with complete information recent work across a wide range of issues in political economy as well as in american comparative and international politics tries to explain the inefficient use of power revolutions civil wars high levels of public debt international conflict and costly policy insulation in terms of commitment problems this paper shows that a common mechanism is at work in a number of these diverse studies this common mechanism provides a more general formulation of a type of commitment problem that can arise in many different substantive settings the present analysis then formalizes this mechanism as an inefficiency condition that ensures that all of the equilibria of a stochastic game are inefficient this condition has a natural substantive interpretation large rapid changes in the actors relative power measured in terms of their minmax payoffs may cause inefficiency