chapter  10
22 Pages

Redistribution, Decentralization and Constitutional Rules 1

ByFederico Etro, Piero Giarda

This chapter provides an empirical discussion on the trade-off between decentralization and redistribution. It studies the constitutional choice between a centralized and a decentralized system and provides some theoretical rationales for the existence of a trade-off between redistribution and decentralization. The chapter discusses the relationship between transparency in politics and redistributive policies in a wider perspective. It then illustrates Decentralization Index pattern for OECD countries and some other groups of countries in the period 1972-1997. The chapter also deals with the choice between centralization and decentralization and the relationship between inequality and such a choice. It then examines that a transition from a centralized system to an efficient decentralized one always implies giving up to some redistribution to be politically feasible. The chapter then discusses a system of fiscal federalism with a House of Regions where an efficient outcome is realized with partial redistribution.