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Laboratories of Democracy: Policy Experimentation under Decentralization

Author

Listed:
  • Chen Cheng
  • Christopher Li

Abstract

We develop a model of policy experimentation in which the policy decisions of local and national politicians are driven by career concerns. When politicians' payoffs are convex in their reputation and policymaking is opaque, local politicians experiment by introducing more diverse policies than national politicians do. The welfare implications of decentralization depend on homogeneity between districts. In particular, learning about policies is greater under decentralization if and only if the districts are sufficiently homogeneous. The model delivers novel testable hypotheses. Decentralization should be positively correlated with more diverse (uniform) local policies among countries with opaque (transparent) policymaking.

Suggested Citation

  • Chen Cheng & Christopher Li, 2019. "Laboratories of Democracy: Policy Experimentation under Decentralization," American Economic Journal: Microeconomics, American Economic Association, vol. 11(3), pages 125-154, August.
    • Handle: RePEc:aea:aejmic:v:11:y:2019:i:3:p:125-54
    Note: DOI: 10.1257/mic.20160257
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    Citations

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    Cited by:

    1. Bo, Shiyu & Deng, Liuchun & Sun, Yufeng & Wang, Boqun, 2021. "Intergovernmental communication under decentralization," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 606-652.
    2. Hefeker, Carsten, 2023. "Policy competition, imitation and coordination under uncertainty," Economic Systems, Elsevier, vol. 47(1).
    3. Tinghua Yu, 2021. "Accountability and learning with motivated agents," BCAM Working Papers 2107, Birkbeck Centre for Applied Macroeconomics.
    4. Phil Kerpen & Stephen Moore & Casey B. Mulligan, 2022. "A Final Report Card on the States’ Response to COVID-19," NBER Working Papers 29928, National Bureau of Economic Research, Inc.
    5. Qiang Fu & Ming Li & Xue Qiao, 2022. "On the paradox of mediocracy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(2), pages 492-521, April.
    6. Aurélie Cassette & Etienne Farvaque, 2019. "Sticky decentralization? Evidence from the French school reform," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2019-03-ccr, Condorcet Center for political Economy.
    7. Tinghua Yu, 2022. "Accountability and learning with motivated agents," Journal of Theoretical Politics, , vol. 34(2), pages 313-329, April.
    8. Cheng, Chen & Xing, Yiqing, 2023. "A screening perspective on experimental zones," China Economic Review, Elsevier, vol. 77(C).

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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