A Dynamic Federalism Test

Jean-Edouard Colliard and Armin Steinbach
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Jean-Edouard Colliard: HEC Paris - Finance Department
Armin Steinbach: HEC Paris; Max Planck Institute for Research on Collective Goods

No 1587, HEC Research Papers Series from HEC Paris

Abstract: Federalism notoriously struggles with the allocation of competences between the federal and sub-federal levels. Legal doctrines vary across jurisdictions in how they allocate authority. From an efficiency perspective, the allocation is determined through a "federalism test" comparing the efficiency of each level of government. This comparison is difficult because which allocation will be more efficient in the future is uncertain and potentially endogenous to the current allocation. We formally define efficiency in such a context, show that a "static" federalism test that neglects endogeneity can fail to implement the efficient allocation, and propose a "dynamic" test to address the issue. We discuss the relevance of our results in light of jurisprudence in different policy areas.

Keywords: Federalism; Subsidiarity; Centralization; Decentralization (search for similar items in EconPapers)
JEL-codes: D72 F55 H77 K19 K33 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2025-11-07
New Economics Papers: this item is included in nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1587

DOI: 10.2139/ssrn.5717305

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