On the Endogenous Allocation of Decision Powers in Federal Structures

Oliver Lorz and Gerald Willmann

No 1209, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper provides a political-economy explanation of the degree of centralization in economic policy making. To determine which policies are to be centralized, regions select representatives who then negotiate the degree of centralization and the regional cost shares of centrally decided policies. We show that the resulting degree of cen- tralization is suboptimally low. Voters strategically delegate to repre- sentatives who are averse to public spending and hence prefer decen- tralized decisions in order to reduce their region's cost share. When spill-overs are asymmetric, strategic delegation is stronger at the pe- riphery than at the center.

Keywords: Political Economy; Fiscal Federalism; Endogenous Centralization; Constitutional Design (search for similar items in EconPapers)
JEL-codes: H11 H41 H77 (search for similar items in EconPapers)
Date: 2004
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https://www.econstor.eu/bitstream/10419/17760/1/kap1209.pdf (application/pdf)

Related works:
Journal Article: On the endogenous allocation of decision powers in federal structures (2005)
Working Paper: On the Endogenous Allocation of Decision Powers in Federal Structures (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1209

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