Open AccessLocal agency costs of political centralization
Author(s) -
Myerson Roger B.
Publication year - 2021
Publication title -
theoretical economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.404
H-Index - 32
eISSN - 1555-7561
pISSN - 1933-6837
DOI - 10.3982/te3763
Subject(s) - ruler , autocracy , accountability , agency (philosophy) , politics , local government , business , democracy , public administration , economics , law and economics , law , political science , sociology , social science , physics , quantum mechanics
We analyze a model of moral hazard in local public services, which could be efficiently managed by officials under local democratic accountability, but not by officials who are appointed by the ruler of a centralized autocracy. The ruler might prefer to retain an official who diverted resources from public services but contributed part to benefit the ruler. The autocratic ruler would value better public services only when residents reduce taxable investments, which become unprofitable without good public services. For local government to benefit local residents, they must have some decentralized power to punish an official who serves them badly even while serving the ruler well.