FISCAL DECENTRALIZATION, GOVERNANCE, AND ECONOMIC PERFORMANCE: A RECONSIDERATION

In countries with tax-sharing systems, assigning local governments a large share of locally generated revenues is often thought to promote economic development. The more local officials benefit from local economic activity, the more supportive of business and less corrupt they should be, resulting in higher output. Some attribute China's rapid growth to its high local retention rates and Russia's 1990s stagnation to the central clawback of local revenues. I show that such arguments ignore an important actor in the game – the central government. If increasing the local tax share improves incentives for local authorities, it worsens them for central officials. The net effect on output is indeterminate.     

PROMISE KEEPING IN THE GREAT SOCIETY: A MODEL OF CREDIT INFORMATION SHARING

Reputation is possible in a small community, but in the Smith-Lippmann-Hayekian Great Society people are mainly strangers. I model credit reporting as a system of formalized and surgically-precise gossip. In the Great Society credit reporting makes possible reputations, which make possible credit relationships. But forming a credit reporting system is no simple matter. Historically it has been local gossip in the small community that has made possible credit reporting "gossip" in the Great Society.