In economics, the local knowledge advantage is arguably one of the key arguments in favor of decentralizing the public sector. However, empirical investigations of this particular effect have been scarce. This paper tests the existence of the local knowledge advantage in a real-world setting....

The aim of the paper is to explicitly disentangle the role of political and cultural boundaries as factors of fragmentation of economies within large countries. On the one hand, local protectionism plays a substantial role in many federations and decentralized states. On the other hand, if the...