Decentralised Provision of Quasi-Private Goods: The Case of Colombia
The series Working Papers on Economics is published by the Office for Economic Studies at the Banco de la República (Central Bank of Colombia). The works published are provisional, and their authors are fully responsible for the opinions expressed in them, as well as for possible mistakes. The opinions expressed herein are those of the authors and do not necessarily reflect the views of Banco de la República or its Board of Directors.
This paper quantifies the welfare effects of decentralisation in Colombia, using a multiregional CGE model. We investigate to what extent will the Colombian population be better off when goods such as health and education, are delivered locally as against centrally. A provision scheme based on the median voter is considered. According to the results, the provision of health and education by regional governments improves the welfare of the Colombian population as a whole, since regional governments provide goods and services in a way that better caters to local preferences. More importantly, these welfare gains vary from 1.3% to 2.3% of GDP, a substantial magnitude especially when compared with the efficency gains associated to the tax reforms of the early nineties. Keywords: Decentralisation, applied CGE modelling, quasi-private goods.
