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Federalism as a Commitment to Reserving Market Incentives

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  • Yingyi Qian
  • Barry R. Weingast

Abstract

The authors advance a new perspective in the study of federalism. Their approach views federalism as a governance solution of the state to credibly preserving market incentives. Market incentives are preserved if the state is credibly prevented from compromising on future economic success and from bailing out future failures. The salient features of federalism--decentralization of information and authority and interjurisdictional competition--help provide credible commitment or these purposes. In addition, the authors suggest that some federalism are self-sustaining.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.11.4.83
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 11 (1997)
Issue (Month): 4 (Fall)
Pages: 83-92

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Handle: RePEc:aea:jecper:v:11:y:1997:i:4:p:83-92

Note: DOI: 10.1257/jep.11.4.83
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