American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking
American Economic Review
vol. 99,
no. 4, September 2009
(pp. 1206–17)
Abstract
We analyze models with interjurisdictional spillovers among heterogeneous jurisdictions, such as CO2 emissions that affect the global environment. Each jurisdiction's emissions depend upon the local stock of capital, which is interjurisdictionally mobile and subject to local taxation. In important cases, decentralized policy-making leads to efficient resource allocation, even in the complete absence of corrective interventions by higher-level governments or coordination of policy through Coasian bargaining. In particular, even when the preferences and production technologies differ among the agents, the decentralized system can result in globally efficient allocation. (JEL D62, H23, H73, H87, Q58)Citation
Ogawa, Hikaru, and David E. Wildasin. 2009. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking." American Economic Review, 99 (4): 1206–17. DOI: 10.1257/aer.99.4.1206JEL Classification
- D62 Externalities
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H73 State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects
- H87 International Fiscal Issues; International Public Goods
- Q58 Environmental Economics: Government Policy