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Public Goods in Federal Systems

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  • Hafer, Catherine
  • Landa, Dimitri

Abstract

We study a political-economic model of federations with both federal and supplemental regional provision of a local (impure) public good with spillover effects. Regional differences in average income levels and externalities of provision induce differences in preferences over federal and regional levels of provision. Although the voters' preferences are not single-peaked, we provide sufficient conditions for the existence of voting equilibria and characterize their properties under alternative federal institutional arrangements. We show that, under different conditions on parameters, the voting equilibria display markedly different patterns of federal vs. local provision, relying on different political coalitions for their support. We show that the inter-regional redistributive tensions present in federations lead to differences in regional support for different degrees of fiscal (de-)centralization: federation, confederation, and complete centralization.

Suggested Citation

  • Hafer, Catherine & Landa, Dimitri, 2007. "Public Goods in Federal Systems," Quarterly Journal of Political Science, now publishers, vol. 2(3), pages 253-275, August.
    • Handle: RePEc:now:jlqjps:100.00006001
    DOI: 10.1561/100.00006001
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    Cited by:

    1. Perez-Sebastian, Fidel & Raveh, Ohad & Reingewertz, Yaniv, 2019. "Heterogeneous vertical tax externalities and macroeconomic effects of federal tax changes: The role of fiscal advantage," Journal of Urban Economics, Elsevier, vol. 112(C), pages 85-110.
    2. Sanford C. Gordon & Dimitri Landa, 2018. "Polarized preferences versus polarizing policies," Public Choice, Springer, vol. 176(1), pages 193-210, July.
    3. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах [ENDOGENOUS BOUNDARIES AND DISTRIBUTION OF POWER In the Federation]," MPRA Paper 16473, University Library of Munich, Germany.
    4. Luelfesmann, Christoph & Kessler, Anke & Myers, Gordon M., 2015. "The architecture of federations: Constitutions, bargaining, and moral hazard," Journal of Public Economics, Elsevier, vol. 124(C), pages 18-29.
    5. Fidel Perez-Sebastian & Ohad Raveh, 2016. "Federal Tax Policies, Congressional Voting, and the Fiscal Advantage of Natural Resources," OxCarre Working Papers 182, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    6. Perez-Sebastian, Fidel & Raveh, Ohad, 2018. "What drives vertical fiscal interactions? Evidence from the 1980 Crude Oil Windfall Act," Regional Science and Urban Economics, Elsevier, vol. 73(C), pages 251-268.
    7. Nikitas Konstantinidis, 2008. "Gradualism and uncertainty in international union formation: The European Community’s first enlargement," The Review of International Organizations, Springer, vol. 3(4), pages 399-433, December.
    8. Elizabeth Maggie Penn, 2009. "From Many, One," Journal of Theoretical Politics, , vol. 21(3), pages 343-364, July.

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