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Decentralization and the fate of minorities

Bjorvatn, Kjetil; Cappelen, Alexander W.
Working paper
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URI
http://hdl.handle.net/11250/162878
Date
2002-12
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  • Discussion papers (SAM) [608]
Abstract
This paper analyses the welfare effects of a change from centralized

to decentralized political authority. The potential disadvantage

with decentralization in our model is that local dominant groups with

rather “extreme” preferences may win the vote and implement policies

that harm the well-being of local minorities. When the national

median voter represents a “moderate” position, centralization can be

seen as a way of protecting the interests of local minorities. Our main

result is that the centralized solution may welfare dominate decentralization

even in the absence of scale economics and interregional

spillovers. We also demonstrate that increased segregation, increased

mobility, and increased heterogeneity in preferences, factors that are

normally considered to be arguments in favor of decentralization, may

reduce the attractiveness of the decentralized solution from a welfare

perspective. Finally, we show that when the national median voter is

an “extreme” type, decentralization may represent a way of protecting local minority interests.
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2002:22

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