The normative literature on decentralization of public goods provision has many testable empirical implications. This paper explores some of these implications by looking at the relationship between decentralization and an environmental public good, water quality in rivers at monitoring stations around the world. It examines pollution levels and interjurisdictional variation in these levels for both a local and a regional pollutant. When fixed effects are included, greater decentralization is associated with higher levels of the regional pollutant only, suggesting interjurisdictional free riding. Federal countries exhibit greater interjurisdictional variation in both pollutants, consistent with the traditional view that decentralization allows policies more tailored to local conditions.
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This paper was revised on May 26, 2009
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