On the Theory and Practise of Fiscal Decentralization

The traditional theory of public finance has made a strong case for a major role for fiscal decentralization. This case is based on an improved allocation of resources in the public sector. And it has four basic elements. First, regional or local governments are in a position to adapt outputs of public services to the preferences and particular circumstances of their constituencies, as compared to a central solution which presumes that one size fits all. Second, in a setting of mobile households, individuals can seek out jurisdictions that provide outputs well suited to their tastes, thereby increasing the potential gains from the decentralized provision of public services (Tiebout 1956). Third, in contrast to the monopolist position of the central government, decentralized levels of government face competition from their neighbors; such competition constrains budgetary growth and provides pressures for the efficient provision of public services. And fourth, decentralization may encourage experimentation and innovation as individual jurisdictions are free to adopt new approaches to public policy; in this way, decentralization can provide a valuable Alaboratory for fiscal experiments. However, this basic economic rationale for decentralization of the public sector is not quite so simple and compelling as it appears. Some of the more recent literature provides, first, a thoughtful and provocative critique of the traditional view of fiscal decentralization, and, second, some new approaches that reveal its dark side, especially in practice. There is emerging, in short, a broader perspective on fiscal decentralization that raises some serious questions about its capacity to provide an unambiguously positive contribution to an improved performance of the public sector. My purpose in this paper is twofold. First, I want to review the basic theory of fiscal decentralization. There are some loose ends to the traditional argument that open up some intriguing issues. Second, I want to turn to some of new literature on fiscal discipline in multilevel government. This literature has focused attention on some basic and destructive forces that can undermine the economic performance of a relatively decentralized public sector. I find it helpful to begin by revisiting a Decentralization Theorem that I formulated long ago. As a point of departure, I want to explain briefly why I introduced the proposition and the rationale for its particular form and proof.Fiscal Decentralization, Public Finance

Assistance to the Poor in a Federal System

This paper explores the roles of different levels of government in assisting the poor. Using a model with utility interdependence, the paper presents some theoretical results on how levels of poor relief vary with the extent of mobility of the poor under both centralized and decentralized systems of support. After surveying the relevant empirical work and the experience under the English Poor Laws, the paper argues for a basic role for central government in this function.

D2P2: database of disordered protein predictions

We present the Database of Disordered Protein Prediction (D2P2), available at http://d2p2.pro (including website source code). A battery of disorder predictors and their variants, VL-XT, VSL2b, PrDOS, PV2, Espritz and IUPred, were run on all protein sequences from 1765 complete proteomes (to be updated as more genomes are completed). Integrated with these results are all of the predicted (mostly structured) SCOP domains using the SUPERFAMILY predictor. These disorder/structure annotations together enable comparison of the disorder predictors with each other and examination of the overlap between disordered predictions and SCOP domains on a large scale. D2P2 will increase our understanding of the interplay between disorder and structure, the genomic distribution of disorder, and its evolutionary history. The parsed data are made available in a unified format for download as flat files or SQL tables either by genome, by predictor, or for the complete set. An interactive website provides a graphical view of each protein annotated with the SCOP domains and disordered regions from all predictors overlaid (or shown as a consensus). There are statistics and tools for browsing and comparing genomes and their disorder within the context of their position on the tree of life. © The Author(s) 2012. Published by Oxford University Press

Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy

In 2005, the European Union introduced the largest and most ambitious emissions trading program in the world to meet its Kyoto commitments for the containment of global climate change. The EU Emissions Trading Scheme (EU ETS) has some distinctive features that differentiate it from the more standard model of emissions trading. In particular, it has a relatively decentralized structure that gives individual member states responsibility for setting targets, allocating permits, determining verification and enforcement, and making some choices about flexibility. It is also a “cap-within-a-cap,” seeking to achieve the Kyoto targets while only covering about half of EU emissions. Finally, it is a program that many hope will link with other greenhouse gas trading programs in the future—something we have not seen among existing trading systems. Examining these features coupled with recent EU ETS experience offers lessons about how cost effectiveness, equity, flexibility, and compliance fare in a multi-jurisdictional trading program, and highlights the challenges facing a global emissions trading regime.emissions trading, Kyoto Protocol, European Union, linking, climate change

Are Energy Efficiency Standards Justified?

This paper develops and parameterizes an overarching analytical framework to estimate the welfare effects of energy efficiency standards applied to automobiles and electricity-using durables. We also compare standards with sectoral and economywide pricing policies. The model captures a wide range of externalities and preexisting energy policies, and it allows for possible “misperceptions”—market failures that cause underinvestment in energy efficiency.Automobile fuel economy standards are not part of the first-best policy to reduce gasoline: fuel taxes are always superior because they reduce the externalities related to vehicle miles traveled. For the power sector, potential welfare gains from supplementing pricing instruments with efficiency standards are small at best. If pricing instruments are not feasible, a large misperceptions failure is required to justify efficiency standards, and even in this case the optimal reductions in fuel and electricity use are relatively modest. Reducing economywide carbon dioxide emissions through regulatory packages (combining efficiency and emissions standards) involves much higher costs than pricing instruments.standards, energy taxes, market failure, climate, power sector, gasoline