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

Anke Kessler

No 7910, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The paper presents a positive model of communication in federal legislatures to study the incentives of members to engage in a meaningful exchange of information, and how this shapes policy outcomes. Depending on the type of policy under consideration, communication between delegates generally suffers from a bias that make truthful revelation difficult and sometimes impossible. This generates inefficient policy choices at the federal level that are often are endogenously characterized by overspending, universalism and uniformity. Building on these findings, I develop a simple theory of fiscal (de-)centralization, which revisits Oates' decentralization theorem in a world of incomplete information and strategic communication. Empirical results from a cross section of U.S. municipalities strongly support the predicted pattern of spending.

Keywords: Communication; Debate; Fiscal federalism; Legislative behavior; Universalism (search for similar items in EconPapers)
JEL-codes: D72 D82 H50 H77 (search for similar items in EconPapers)
Date: 2010-07
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Citations: View citations in EconPapers (2)

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Journal Article: Communication in Federal Politics: Universalism, Policy Uniformity, and the Optimal Allocation of Fiscal Authority (2014)
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