On the Incentives to Experiment in Federations

Christos Kotsogiannis and Robert Schwager

No 1585, CESifo Working Paper Series from CESifo

Abstract: Conventional wisdom has it that policy innovation is better promoted in a federal rather than in a unitary system. Recent research, however, has provided theoretical evidence to the contrary: a multi-jurisdictional system is characterized - due to the existence of a horizontal information externality - by under-provision of policy innovation. This paper presents a simple model that introduces political competition for federal office. Under such competition political actors use the innovative policies in order to signal ability to the electorate. In the equilibrium analyzed policy innovation may occur more frequently than in a unitary system. It is thus shown that, once electoral motives are accounted for, the conventional wisdom is likely to be a valid proposition.

Keywords: fiscal federalism; policy innovation; policy experimentation (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: On the incentives to experiment in federations (2006)
Working Paper: On the Incentives to Experiment in Federations (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1585

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