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The Assignment of Powers in Federal and Unitary States

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  • Lockwood, Ben

Abstract

This paper studies a model where the power to set policy (a choice of project) may be assigned to central or regional government via either a federal or unitary referendum (constitutional rule, CR). The bene…t of central provision is an economy of scale, while the cost is political ine¢- ciency. The relationship between federal and unitary CRs is characterized in the asymptotic case as the number of regions becomes large, under the assumption that the median project bene…t in any region is a random draw from a …xed distribution, G: Under some symmetry assumptions, the relationship depends only on the shape of G; not on how willingnesses to pay are distributed within regions. The relationship to Cremer and Palfrey’s (1996) “principle of aggregation” is established. Asymptotic results on the e¢ciency of the two CRs are also proved.

Suggested Citation

  • Lockwood, Ben, 2000. "The Assignment of Powers in Federal and Unitary States," Economic Research Papers 269340, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269340
    DOI: 10.22004/ag.econ.269340
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    1. Caillaud, B. & Jullien, B. & Picard, P., 1996. "National vs European incentive policies: Bargaining, information and coordination," European Economic Review, Elsevier, vol. 40(1), pages 91-111, January.
    2. Cremer, Jacques & Palfrey, Thomas R., 1996. "In or out?: Centralization by majority vote," European Economic Review, Elsevier, vol. 40(1), pages 43-60, January.
    3. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(2), pages 207-227, June.
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    5. Persson, Torsten, 1998. "Economic Policy and Special Interest Politics," Economic Journal, Royal Economic Society, vol. 108(447), pages 310-327, March.
    6. Crémer, Jacques & Palfrey, Thomas R., 1999. "Political Confederation," American Political Science Review, Cambridge University Press, vol. 93(1), pages 69-83, March.
    7. Buchanan, James M, 1987. "The Constitution of Economic Policy," American Economic Review, American Economic Association, vol. 77(3), pages 243-250, June.
    8. Lockwood, Ben, "undated". "Distributive Politics and the Benefits of Decentralisation," Economic Research Papers 268795, University of Warwick - Department of Economics.
    9. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(1), pages 85-114.
    10. Patrick Bolton & Gérard Roland, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1057-1090.
    11. Buchanan, James M, 1975. "A Contractarian Paradigm for Applying Economic Theory," American Economic Review, American Economic Association, vol. 65(2), pages 225-230, May.
    12. Bird, Richard M., 1993. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal, National Tax Association, vol. 46(2), pages 207-27, June.
    13. Gilbert, Guy & Picard, Pierre, 1996. "Incentives and optimal size of local jurisdictions," European Economic Review, Elsevier, vol. 40(1), pages 19-41, January.
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    Cited by:

    1. Iregui, Ana Maria, 2005. "Decentralised provision of quasi-private goods: The case of Colombia," Economic Modelling, Elsevier, vol. 22(4), pages 683-706, July.
    2. Marco Alderighi & Christophe Feder, 2014. "Political competition, power allocation and welfare in unitary and federal systems," Working Paper series 23_14, Rimini Centre for Economic Analysis.

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    More about this item

    Keywords

    Agricultural and Food Policy; Political Economy;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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