By European Conference of Ministers of Tran
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They are better informed of local needs and opportunities, they can respond faster and more flexibly and they are more closely watched and monitored by the electorate. They enjoy an information advantage. In other words, decentralisation decreases transaction costs. Counter-arguments have also been offered (Prud’homme, 1995). The allocative efficiency argument assumes that all the inhabitants of a given region have similar tastes and similar incomes. It further assumes that local and regional elections are an effective mechanism for the expression of a detailed demand for public goods and services.
10. 44. Terrassier (1999a), p. 4. 45. Newman and Walder (2003), p. 160. 46. Chapon (2002), p. 305. 47. Chapon (2002), p. 305. TRANSPORT AND DECENTRALISATION – ISBN 92-821-1342-6 - © ECMT, 2006 33 34 - DECENTRALISATION, INTERGOVERNMENTAL COMPETITION/EMULATION AND EFFICIENCY 48. Terrassier (1999b), p. 4. 49. Chapon (2002), p. 305. 50. Terrassier (1999a), p. 1. 51. Ibid, p. 3. 52. Terrassier (2002), p. 4. 53. Terrassier (1999a), p. 3. 54. Cortes (2002), p. 7. 55. Valo (2001), p. 3. 56. Ibid, p. 3.
One can consider that the associated misallocations are minor, and therefore should be ignored or accepted. One can also devise ad hoc transfer or co-financing systems which will in part deal with such spillovers. A ring road which will benefit both local users and national users can be financed jointly by the central and local governments interested. Who is formally responsible does not matter much: if it is the local government, it will obtain a transfer from the central government; if it is the central government it will obtain a subsidy from the local government.