Experimentation in Federal Systems

Steven Callander and Bard Harstad

No 19601, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We present a model where heterogeneous districts choose both whether to experiment and the policies to experiment with. Since districts learn from each other, the first-best requires that policy experiments converge so that innovations are useful also for neighbors. However, the equilibrium implies the reverse - policy divergence - since each district uses its policy choice to discourage free-riding. We then study a clumsy central government that harmonizes final policy choices. This progressive concentration of power induces a policy tournament that can increase the incentive to experiment and encourage policy convergence. We derive the best political regime as well as the optimal levels of heterogeneity, transparency, prizes, and intellectual property rights.

JEL-codes: D78 H77 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-cdm, nep-exp and nep-pol
Note: POL
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Steven Callande & BÃ¥rd Harstad, 2015. "Experimentation in Federal Systems," The Quarterly Journal of Economics, Oxford University Press, vol. 130(2), pages 951-1002.

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