This paper takes a fresh look at the trade-off between centralized and decentralized provision of local public goods. The point of departure is to model a centralized system as one in which public spending is financed by general taxation, but districts can receive different levels of local...

The primary purpose of this paper is to demonstrate that decentralized investment management systems may not always be efficient. Specifically, within the context of a particular portfolio choice paradigm it is shown that a given decentralized investment management system is (weakly) efficient...

The paper provides a theoretical framework for analyzing policy formation among independent authorities operating in an interdependent environment. This is then applied to the analysis of optimal monetary policy in a stochastic two-country model with rational expectations. The main conclusions...

Patterns of political unification and fragmentation have crucial implications for comparative economic development. Diamond (1997) famously argued that "fractured land" was responsible for China's tendency toward political unification and Europe's protracted political fragmentation. We build a...

In this paper we explore efficiency and optimal policy in decentralized transportation markets that suffer from search frictions, such as taxicabs, trucks and bulk shipping. We illustrate the impact of two externalities: the well-known thin/thick market externalities and what we call pooling...

The paper studies asset pricing in informationally decentralized markets. These markets have two key frictions: trading is decentralized (bilateral), and some agents have private information. We analyze how uninformed agents acquire information over time from their bilateral trades. In...

We study a simple model of a decentralized market game in which firms make directed offers to workers. We focus on markets in which agents have aligned preferences. When agents have complete information or when there are no frictions in the economy, there exists an equilibrium that yields the...

Under most federal environmental laws and some health and safety laws, states may apply for "primacy," that is, authority to implement and enforce federal law, through a process known as "authorization." Some observers fear that states use authorization to adopt more lax policies in a regulatory...