Federal Directives, Local Discretion and the Majority Rule
AbstractWe consider a federation in which citizens determine by federal majority rule a discretionary policy space which partially restricts the sovereignty of member states. Citizens first vote on the size of the discretionary space (the degree of local discretion), and then on its location on the policy space (the federal directive). Finally, each state votes on its respective policy within the discretionary space. This federal mechanism allows voters to express directly their trade-o¤ between flexibility and policy harmonization. We show that at the voting equilibrium, the federal directive is negatively sensitive to the preferences of nonmedian voters. Moreover, the degree of local discretion is too limited and insufficiently sensitive to the magnitude of externalities. Hence, the model shows that inadequate and excessively rigid federal interventions can emerge from a neutral and democratic decision process without agency costs or informational imperfections.
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Bibliographic InfoPaper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1522.
Date of creation: Dec 2010
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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
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- Maj - Business Administration and Business Economics; Marketing; Accounting - - - - -
- rul - - - - - -
- JEL - Labor and Demographic Economics - - - - -
- Cla - Mathematical and Quantitative Methods - - - - -
- Num - Economic History - - - - -
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-19 (All new papers)
- NEP-CDM-2011-03-19 (Collective Decision-Making)
- NEP-POL-2011-03-19 (Positive Political Economics)
- NEP-URE-2011-03-19 (Urban & Real Estate Economics)
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- Villas-Boas, J. Miguel, 1997. "Comparative Statics of Fixed Points," Journal of Economic Theory, Elsevier, vol. 73(1), pages 183-198, March.
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