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Critical Decisions and Constitutional Rules

Toke Aidt () and Francesco Giovannoni

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Many constitutions specify procedures that allow critical decisions to be made with a different rule from day-to-day decisions. We propose a theory of constitutional rules that explains why. The theory is based on the assumption that the type of decision can be observed, but not verified. We characterise two classes of second-best constitution, both with clear analogues in real world constitutions: i) incentive scheme (IS) constitutions that elicit information about the type of decision through costly decision rule switching procedures, and ii) linking scheme (LS) constitutions that grant limited veto powers to interested parties. We explore how the relative performance of the IS and LS constitution depends on the economic environment.

Keywords: constitutions; social contracts; majority rules; vetoes; referenda (search for similar items in EconPapers)
JEL-codes: H10 H11 (search for similar items in EconPapers)
Pages: 44
Date: 2005-05
New Economics Papers: this item is included in nep-cdm and nep-pbe
Note: PE
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Journal Article: Critical decisions and constitutional rules (2011) Downloads
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