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Coordination in heterogeneous federal systems

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  • Loeper, Antoine
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    Abstract

    We compare centralized and decentralized policy making in a federation in which policy heterogeneity is inherently costly and preferences vary across jurisdictions: all jurisdictions agree that some harmonization is desirable but no one agrees on the direction of harmonization. This type of collective choice problem arises when members of a federal system have to coordinate nonbudgetary policies such as laws, regulations, standards, or diplomatic policies. Contrary to the common wisdom, decentralization becomes optimal when coordination becomes very important. When coordination costs are symmetric, decentralization dominates centralization irrespective of the magnitude of externalities and the heterogeneity of preferences. In the case of discontinuous network effects, standardization never Pareto dominates decentralization.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 95 (2011)
    Issue (Month): 7 ()
    Pages: 900-912

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    Handle: RePEc:eee:pubeco:v:95:y:2011:i:7:p:900-912

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    Web page: http://www.elsevier.com/locate/inca/505578

    Related research

    Keywords: Federalism; Decentralization; Coordination; Externality; Reciprocality; Harmonization; Law; Regulation;

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    References

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    Cited by:
    1. Emilio Guterriez & Ruben Durante, 2013. "Fighting Crime with a Little Help from my Friends: Party Affiliation, Inter‐jurisdictional Cooperation and Crime in Mexico," Sciences Po publications 17, Sciences Po.
    2. Martin Gregor & Lenka Šastná, 2011. "The Decentralization Tradeoff for Complementary Spillovers," Working Papers IES 2011/13, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2011.
    3. Martin Gregor, 2012. "Modeling positive inter-jurisdictional public spending spillovers," Working Papers IES 2012/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2012.

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