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Why Adopt a Federal Constitution? And why Decentralize? – Determinants Based on a New Dataset

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  • Gutmann, Jerg
  • Voigt, Stefan

Abstract

Measurement of both federalism and decentralization has been contentious. We introduce three new indicators reflecting important aspects of both federalism and decentralization. The three new indicators are the result of principal component analysis. When we try to identify their main determinants, it turns out that the only explanatory variable that is significantly correlated with all three is the geographical size of a country. Other variables, such as the size of the population, linguistic fractionalization, or the level of democracy, only help to explain variation of one component. We interpret this as evidence that it is important to distinguish between federalism and decentralization, if one is interested in ascertaining their causes and consequences. We further test for the first time the effect of spatial inequality in a country on the adoption of federalism or decentralization and we find that it correlates significantly with constitutional federalism. This suggests that economically heterogeneous states are more likely to adopt a federal constitution.

Suggested Citation

  • Gutmann, Jerg & Voigt, Stefan, 2017. "Why Adopt a Federal Constitution? And why Decentralize? – Determinants Based on a New Dataset," ILE Working Paper Series 6, University of Hamburg, Institute of Law and Economics.
    • Handle: RePEc:zbw:ilewps:6
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    Cited by:

    1. Voigt, Stefan, 2020. "Mind the Gap – Analyzing the Divergence between Constitutional Text and Constitutional Reality," ILE Working Paper Series 32, University of Hamburg, Institute of Law and Economics.
    2. Cornelius O. Okorie & Francisca N. Ogba & Harrison O. Iwuala & Christopher Arua & Nwankwo Felix & Victor C. Nwosumba, 2022. "Decentralization of South Eastern Nigeria’s Local Governments and Achievement of Mandates Enshrined in Nigeria’s 1999 Constitution," SAGE Open, , vol. 12(2), pages 21582440221, April.
    3. Christan Bjørnskov & Miguel Ángel Borrella‐Mas & Martin Rode, 2022. "The economics of change and stability in social trust: Evidence from (and for) Catalan secession," Economics and Politics, Wiley Blackwell, vol. 34(2), pages 275-297, July.

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    More about this item

    Keywords

    Federalism; Fiscal Federalism; Decentralization; Geography; Institutions; Endogenous Constitutions;
    All these keywords.

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H8 - Public Economics - - Miscellaneous Issues

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