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Building the theory: proportional representation and closed party lists

In: Local Accountability and National Coordination in Fiscal Federalism

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Abstract

We develop a comparative analysis of democratic decentralization (subnational elections) versus centralization (national elections) for economies with proportional representation (PR) electoral systems and closed party lists (party leaders have full control of the nomination and order of candidates in the party`s list in local and national elections). We show that democratic decentralization is superior to centralization as a mechanism to provide local public goods (LPGs). Elections persuade politicians to provide LPGs desired by residents of each locality and closed party lists create incentives for local policy coordination; therefore, candidates have incentives to recognize the externalities of LPGs in other localities. Hence, LPGs under subnational elections are Pareto efficient and their regional distribution matches the heterogeneous preferences of residents across localities. In contrast, LPGs under national elections are Pareto efficient but regional policy differentiation is suboptimal. Hence, democratic decentralization dominates centralization.

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  • ., 2019. "Building the theory: proportional representation and closed party lists," Chapters, in: Local Accountability and National Coordination in Fiscal Federalism, chapter 4, pages 84-105, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:18495_4
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