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The Political Economy of Policy Centralization: Direct Versus Representative Democracy

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  • Michela Redoano
  • Kimberley Ann Scharf

Abstract

This paper examines policy centralization outcomes in a two-jurisdiction, political economy model of public good provision choices with heterogeneous policy preferences and interjurisdictional policy spillovers, under alternative democratic choice procedures, namely, direct democracy and representative democracy. We show that policy centralization is more likely to occur if the choice to centralize is made by elected policymakers rather than by referendum. The reason for this result is that delegation of the harmonization choice to elected policymakers can effectively act as a policy commitment device by a pro-centralization jurisdiction and induce a reluctant partner to cooperate. In these situations, policy centralization will result in policies converging towards the choice preferred by the reluctant partner, rather than in a dilution of policy preferences.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2001/wp-cesifo-2001-10/cesifo_wp602.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 602.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_602

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Keywords: international cooperation; trade and environmental policy negotiations;

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References

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  1. Tim Besley & Stephen Coate, . ""An Economic Model of Representative Democracy''," CARESS Working Papres 95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  2. Fershtman, Chaim & Judd, Kenneth L & Kalai, Ehud, 1991. "Observable Contracts: Strategic Delegation and Cooperation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 551-59, August.
  3. Dhillon, A. & Perroni, C. & Scharf, K.A., 1997. "Implementing Tax Coordination," The Warwick Economics Research Paper Series (TWERPS) 501, University of Warwick, Department of Economics.
  4. Persson, Torsten & Tabellini, Guido, 1994. "Does centralization increase the size of government?," European Economic Review, Elsevier, vol. 38(3-4), pages 765-773, April.
  5. Gatsios, Konstantine & Karp, Larry, 1995. "Delegation in a general equilibrium model of customs unions," European Economic Review, Elsevier, vol. 39(2), pages 319-333, February.
  6. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
  7. Gatsios, Konstantine & Karp, Larry, 1989. "Delegation Games in Customs Unions," CEPR Discussion Papers 337, C.E.P.R. Discussion Papers.
  8. Osborne, Martin J & Slivinski, Al, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 65-96, February.
  9. Torsten Persson & Guido Tabellini, 1990. "The Politics of 1992: Fiscal Policy and European Integration," NBER Working Papers 3460, National Bureau of Economic Research, Inc.
  10. Timothy Besley & Stephen Coate, 1999. "Centralized versus Decentralized Provision of Local Public Goods: A Political Economy Analysis," NBER Working Papers 7084, National Bureau of Economic Research, Inc.
  11. Charles Blankart, 2000. "The Process of Government Centralization: A Constitutional View," Constitutional Political Economy, Springer, vol. 11(1), pages 27-39, March.
  12. Christoph A. Schaltegger & Lars P. Feld, 2001. "On Government Centralization and Budget Referendums: Evidence from Switzerland," CESifo Working Paper Series 615, CESifo Group Munich.
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