Communication in Federal Politics: Universalism, Policy Uniformity, and the Optimal Allocation of Fiscal Authority

Anke Kessler

Journal of Political Economy, 2014, vol. 122, issue 4, 766 - 805

Abstract: The paper presents a positive model of policy formation in federal legislatures when delegates engage in the strategic exchange of policy-relevant information. Depending on the type of policy under consideration, communication between delegates generally suffers from a bias that makes truthful communication difficult and sometimes impossible. This generates inefficient federal policy choices that are often endogenously characterized by overspending, universalism, and uniformity. Building on these findings, I develop a theory of fiscal (de-)centralization, which revisits the work of Oates in a world of incomplete information and strategic communication. Empirical results from a cross section of US municipalities are consistent with the predicted pattern of spending.

Date: 2014
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Working Paper: Communication in Federal Politics: Universalism, Policy Uniformity, and the Optimal Allocation of Fiscal Authority (2010)
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