Political competition, power allocation and welfare in unitary and federal systems

Marco Alderighi () and Christophe Feder
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Marco Alderighi: Università della Valle d'Aosta, Università Bocconi, The Rimini Centre for Economic Analysis, Italy

Working Paper series from Rimini Centre for Economic Analysis

Abstract: The paper studies how political competition among self-interested parties affects welfare and power allocation between government levels. We find that the unitary and the federal systems of government are not welfare-maximizing, leading to a higher and a lower than optimal centralization level, respectively. Second best is achieved under the system which induces larger potential welfare losses in response to similar deviations from the first best: the risk of large losses force parties to stay closer to the optimum in order to keep the likelihood of winning the elections high. The federal system yields to the second-best solution when inter-jurisdictional spillovers are weak; vice versa a unitary system is better when such spillovers are strong.

Date: 2014-11
New Economics Papers: this item is included in nep-pol
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:23_14

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