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The Political Economy of Policy Centralization: Direct Versus Representative Democracy

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  • Redoano, Michela
  • Scharf, Kimberley Ann

Abstract

This paper analyses policy centralization outcomes in a two-jurisdiction model of public good provision choices with heterogeneous policy preferences and inter-jurisdictional policy spillovers under two alternative political procedures: direct referendum 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. In these situations, centralized policies converge to the preferred level of the jurisdiction that least favours centralization, rather than to a compromise between the two jurisdictions’ preferred levels.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3631.

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Date of creation: Nov 2002
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Handle: RePEc:cpr:ceprdp:3631

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Keywords: centralization; harmonization;

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  1. Persson, Torsten & Tabellini, Guido, 1991. "The Politics of 1992: Fiscal Policy and European Integration," CEPR Discussion Papers 501, C.E.P.R. Discussion Papers.
  2. 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.
  3. 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.
  4. 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.
  5. Amrita Dhillon & Carlo Perroni & Kimberley A. Scharf, . "Implementing Tax Coordination," EPRU Working Paper Series 97-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  6. Chaim Fershtman & Kenneth L. Judd & Ehud Kalai, 1990. "Observable Contracts: Strategic Delegation and Cooperation," Discussion Papers 879, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. 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.
  8. Christoph A. Schaltegger & Lars P. Feld, 2001. "On Government Centralization and Budget Referendums: Evidence from Switzerland," CESifo Working Paper Series 615, CESifo Group Munich.
  9. 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.
  10. Gatsios, Konstantine & Karp, Larry, 1991. "Delegation Games in Customs Unions," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 391-97, April.
  11. Persson, Torsten & Tabellini, Guido, 1994. "Does centralization increase the size of government?," European Economic Review, Elsevier, vol. 38(3-4), pages 765-773, April.
  12. Charles Blankart, 2000. "The Process of Government Centralization: A Constitutional View," Constitutional Political Economy, Springer, vol. 11(1), pages 27-39, March.
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