Why countries are fiscally decentralizing

This paper models and empirically investigates underlying forces that promote governmental decentralization, or effective federalism, in the world over the last 25 years. A move to a federal system is based on the demand by hinterland regions for local autonomy, which increases with national income growth, greater relative hinterland population, and increasing national population. It is influenced as well by the degree of democratization nationally and locally. Decentralization is measured by both institutional indices indicating greater devolution of power to local governments and the share of local governments in national government consumption. Empirically, the paper finds that decentralization changes in ways predicted, in particular it increases with economic growth, country size, and population. Institutional structures based on colonial experience and initial constitutional provisions also matter

Why countries are fiscally decentralizing

This paper models and empirically investigates underlying forces that promote governmental decentralization, or effective federalism, in the world over the last 25 years. A move to a federal system is based on the demand by hinterland regions for local autonomy, which increases with national income growth, greater relative hinterland population, and increasing national population. It is influenced as well by the degree of democratization nationally and locally. Decentralization is measured by both institutional indices indicating greater devolution of power to local governments and the share of local governments in national government consumption. Empirically, the paper finds that decentralization changes in ways predicted, in particular it increases with economic growth, country size, and population. Institutional structures based on colonial experience and initial constitutional provisions also matter

Networking off Madison Avenue

This paper studies the advertising agency industry in Manhattan to infer networking benefits among agencies in close spatial proximity. We use economic census data that allow us to distinguish locations at a fine level of geographic detail, so as to infer the strong effect on productivity of having more near advertising agency neighbours. Paying close attention to identification issues, we show, however, that there is extremely rapid spatial decay in the benefits of more near neighbours, even in the close quarters of southern Manhattan, a finding that is new to the literature. This suggests that high density of similar commercial establishments is important in enhancing local productivity for those industries found in large cities, where information sharing plays a critical role. Our results indicate that the benefits of more near neighbours are largely capitalized into rents rather than wages, challenging an existing literature, which estimates wage equations alone to infer agglomeration benefits