Decentralization as an incentive scheme

Recent changes have introduced more decentralization in a number of traditionally centralized countries.1 In the case of France, it is sometimes claimed that the 1982-1983 reform of subcentral government is of historical importance. Although the principles of that reform are not contested any more by the new majority elected in 1986, opinions still differ on a number of policy issues. Some of the issues are presented in this introductory section. But the main purpose of this paper is not to expose or discuss in detail the problems of decentralization in France. As argued in the second part of the introductory section, the theoretical framework in which the policy issues of decentralization are usually discussed by economists is somewhat unsatisfactory, in particular when applied to unitary states such as Britain or France. The bulk of the paper is devoted to the exploration of a different approach to decentralization. It is not purported however that this approach could completely replace the more traditional one. Consequently, when, in the concluding section, we return briefly to the policy issues identified here, this is to be read as a preliminary attempt to evaluate the relevance of the reasoning developed in the paper.