MACROECONOMIC CONTROL OF LOCAL GOVERNMENTS IN SCANDINAVIA - THE FORMATIVE YEARS

The three Scandinavian countries have been able to radically decentral ize their public sectors without losing the ability to control macroec onomic performance. The explanation of this puzzle is that, in all thr ee countries, institutions have been established to coordinate economi c activity levels at the local level with macroeconomic policy goals a t the central level. The article investigates how these institutions w ere established, and pays special attention to the precise nature of t hese institutions since they show interesting differences among the ot herwise very similar Scandinavian countries. The article pursues the t hesis that institutional legacies in intergovernmental relations shape institutions like these, unless decision makers face an institutional tabula rasa. Alternative explanations are briefly considered, but the article concludes by supporting the historical approach to politics.