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Pooling sovereignty under the subsidiary principle

  • Giuranno, Michele G.

This paper investigates the decision whether to centralize public policy in an economy with two levels of government. I show that centralization based on the subsidiarity principle emphasizes rather than resolves a conflict of interest between jurisdictions. The extent of the conflict of interest depends on spillovers and differences in tastes for public spending. Spending decisions are determined by negotiation between local representatives in the centralized legislature. If an agreement cannot be reached, policy is determined non-cooperatively by local governments. Results show that pooling sovereignty by the subsidiarity principle fails to fully internalize spillovers and may lead to a misallocation of public resources.

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File URL: http://www.sciencedirect.com/science/article/B6V97-4X60T63-1/2/32b65e347db2b97625ce6b27a5b9cd1e
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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 26 (2010)
Issue (Month): 1 (March)
Pages: 125-136

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Handle: RePEc:eee:poleco:v:26:y:2010:i:1:p:125-136
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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  1. Massimo Bordignon & Paolo Manasse & Guido Tabellini, . "Optimal Regional Redistribution Under Asymmetric Information," Working Papers 93, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
  3. Klaus Weyerstrass & Johannes Jaenicke & Reinhard Neck & Gottfried Haber & Bas van Aarle & Koen Schoors & Niko Gobbin & Peter Claeys, 2006. "Economic spillover and policy coordination in the Euro area," European Economy - Economic Papers 246, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Giuranno, Michele, 2008. "Regional income disparity and the size of the Public Sector," POLIS Working Papers 114, Institute of Public Policy and Public Choice - POLIS.
  5. Haufler, Andreas & Klemm, Alexander & Schjelderup, Guttorm, 2008. "Redistributive taxation, multinational enterprises, and economic integration," European Journal of Political Economy, Elsevier, vol. 24(1), pages 249-255, March.
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