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The Impact of Referendums on the Centralisation of Public Goods Provision: A Political Economy Approach

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  • Jan Schnellenbach
  • Lars P. Feld
  • Christoph A. Schaltegger

Abstract

The paper compares decision-making on the centralisation of public goods provision in the presence of regional externalities under representative and direct democratic institutions. A model with two regions, two public goods and regional spillovers is developed in which uncertainty over the true preferences of candidates makes strategic delegation impossible. Instead, it is shown that the existence of rent extraction by delegates alone suffices to make cooperative centralisation more likely through representative democracy. In the non-cooperative case, the more extensive possibilities for institutional design under representative democracy increase the likelihood of centralisation. Direct democracy may thus be interpreted as a federalism-preserving institution.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-09/cesifo1_wp1803.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1803.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1803

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Keywords: centralisation; direct democracy; representative democracy; public good provision;

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  1. Ellingsen, Tore, 1998. "Externalities vs internalities: a model of political integration," Journal of Public Economics, Elsevier, vol. 68(2), pages 251-268, May.
  2. Thomas Gilligan & John Matsusaka, 2006. "Public choice principles of redistricting," Public Choice, Springer, vol. 129(3), pages 381-398, December.
  3. Etro, Federico & Ageloni, Ignazio & Alesina, Alberto, 2005. "International Unions," Scholarly Articles 4553008, Harvard University Department of Economics.
  4. Michela Redoano & Kimberley Ann Scharf, 2001. "The Political Economy of Policy Centralization: Direct Versus Representative Democracy," CESifo Working Paper Series 602, CESifo Group Munich.
  5. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1027-56, November.
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  7. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall.
  8. Charles Blankart, 2000. "The Process of Government Centralization: A Constitutional View," Constitutional Political Economy, Springer, vol. 11(1), pages 27-39, March.
  9. Robert Dur & Hein Roelfsema, 2005. "Why does centralisation fail to internalise policy externalities?," Public Choice, Springer, vol. 122(3), pages 395-416, March.
  10. Lorz, Jens Oliver & Willmann, Gerald, 2004. "On the Endogenous Allocation of Decision Powers in Federal Structures," Center for European, Governance and Economic Development Research Discussion Papers 25, University of Goettingen, Department of Economics.
  11. Matsusaka, John G & McCarty, Nolan M, 2001. "Political Resource Allocation: Benefits and Costs of Voter Initiatives," Journal of Law, Economics and Organization, Oxford University Press, vol. 17(2), pages 413-48, October.
  12. Martin J. Osborne & Al Slivinksi, 1995. "A Model of Political Competition with Citizen-Candidates," Department of Economics Working Papers 1995-01, McMaster University.
  13. Besley, Timothy & Coate, Stephen, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 85-114, February.
  14. Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-30, March.
  15. Gilligan, Thomas W & Matsusaka, John G, 1999. " Structural Constraints on Partisan Bias under the Efficient Gerrymander," Public Choice, Springer, vol. 100(1-2), pages 65-84, July.
  16. Alesina, Alberto, 1988. "Credibility and Policy Convergence in a Two-Party System with Rational Voters," American Economic Review, American Economic Association, vol. 78(4), pages 796-805, September.
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Cited by:
  1. Niklas Potrafke, 2013. "Evidence on the Political Principal-Agent Problem from Voting on Public Finance for Concert Halls," CESifo Working Paper Series 4306, CESifo Group Munich.
  2. Martin Gregor, 2013. "Modeling positive inter-jurisdictional public spending spillovers," EcoMod2013 5193, EcoMod.
  3. Lisa Grazzini & Alessandro Petretto, 2007. "Voting on Devolution in a Federal Country with a Bicameral National System," Working Papers - Economics wp2007_09, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  4. Lorenz Blume & Stefan Voigt, 2008. "Federalism and Decentralization – A Critical Survey of Frequently Used Indicators," MAGKS Papers on Economics 200821, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  5. Libman, Alexander, 2010. "Constitutions, regulations, and taxes: Contradictions of different aspects of decentralization," Frankfurt School - Working Paper Series 138, Frankfurt School of Finance and Management.
  6. Lars P. Feld & Justina A.V. Fischer & Gebhard Kirchgässner, 2006. "The Effect of Direct Democracy on Income Redistribution: Evidence for Switzerland," CESifo Working Paper Series 1837, CESifo Group Munich.
  7. Feld, Lars P. & Fischer, Justina A.V. & Kirchgaessner, Gebhard, 2007. "The Effect of Direct Democratic Institutions on Income Redistribution: Evidence for Switzerland," Working Paper Series in Economics and Finance 689, Stockholm School of Economics.
  8. Janos Feidler & Klaas Staal, 2012. "Centralized and decentralized provision of public goods," Economics of Governance, Springer, vol. 13(1), pages 73-93, March.
  9. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
    [ENDOGENOUS BOUNDARIES AND DISTRIBUTION O
    ," MPRA Paper 16473, University Library of Munich, Germany.
  10. 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.
  11. Libman, Alexander, 2008. "Endogenous (De)Centralization and the Russian Federalism," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 9(1), pages 23-57.
  12. Thomas Döring & Jan Schnellenbach, 2011. "A tale of two federalisms: Germany, the United States and the ubiquity of centralization," Constitutional Political Economy, Springer, vol. 22(1), pages 83-102, March.

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