Workshop abstract:

The goal of this workshop is to discuss recent research on the longstanding topic: Which conditions are necessary for decentralization to bring the desired benefits? The debate about whether federalism is a good thing for large developing countries has been active for 50 years and, recently, the debate came to the attention of empirical literature (see Bardhan 2002 for a survey.) Empirical literature yielded inconclusive results before it turned to Riker’s (1969) classic work introducing political institutions into the picture. Riker hypothesized that economic decentralization in developing countries works only under some degree of political centralization. Riker’s ideas found solid support in the data (e.g., Blanchard and Shleifer 2002; Enikolopov and Zhuravskaya 2007; Gennaioli and Rainer 2007).    

Outline of the workshop:

1. Summary of the costs (Musgrave and Oates) and benefits (Tiebout) of decentralization
• “Market-preserving” vs. “State-corroding” federalism
• Inconclusive results of empirical research that does not take political institutions into account
2. Riker’s hypothesis about political centralization
• Empirical tests of Riker’s hypothesis
3. Alternative mechanisms (i.e., federal oligarchs)