Local agency costs of political centralization

We analyze a model of moral hazard in local public services, which could be efficiently managed by officials under democratic accountability, but not who are appointed the ruler centralized autocracy. The might prefer to retain an official diverted resources from services contributed part benefit ruler. autocratic would value better only when residents reduce taxable investments, become unprofitable without good services. For government residents, they must have some decentralized power punish serves them badly even while serving well.