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Political Decentralization and Policy Experimentation

Author

Listed:
  • Cai, Hongbin
  • Treisman, Daniel

Abstract

Since 1932, when Justice Louis Brandeis remarked that in a federal system states can serve as "laboratories" of democracy, political decentralization has been thought to stimulate policy experimentation. We reexamine the political economy behind this belief, using a simple model of voting in centralized and decentralized democracies. We find that the electoral logic suggests the opposite conclusion: centralization usually leads to "too much" policy experimentation, compared to the social optimum, while decentralization leads to "too little." Three effects of centralization — an "informational externality," a "risk-seeking" effect, and a "risk-conserving" effect—account for the different outcomes.

Suggested Citation

  • Cai, Hongbin & Treisman, Daniel, 2009. "Political Decentralization and Policy Experimentation," Quarterly Journal of Political Science, now publishers, vol. 4(1), pages 35-58, March.
    • Handle: RePEc:now:jlqjps:100.00008039
    DOI: 10.1561/100.00008039
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    Cited by:

    1. Bowen, Renee & Hwang, Ilwoo & Krasa, Stefan, 2022. "Personal power dynamics in bargaining," Journal of Economic Theory, Elsevier, vol. 205(C).
    2. Hefeker Carsten, 2019. "Helping with the Homework: Support Mechanisms for Uncertain Reforms in a Monetary Union," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(5-6), pages 983-1004, October.
    3. Hefeker, Carsten & Neugart, Michael, 2018. "Non-cooperative and cooperative policy reforms under uncertainty and spillovers," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 94-102.
    4. Bowen, T. Renee & Krasa, Stefan & Hwang, Ilwoo, 2020. "Agenda-Setter Power Dynamics: Learning in Multi-Issue Bargaining," CEPR Discussion Papers 15406, C.E.P.R. Discussion Papers.
    5. Alkon, Meir, 2018. "Do special economic zones induce developmental spillovers? Evidence from India’s states," World Development, Elsevier, vol. 107(C), pages 396-409.
    6. Aurélie Cassette & Etienne Farvaque, 2019. "Sticky decentralization? Evidence from the French school reform," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2019-03-ccr, Condorcet Center for political Economy.
    7. Volker Britz & Hans Gersbach, 2014. "Experimentation in Democratic Mechanisms," CER-ETH Economics working paper series 14/199, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    8. Millimet, Daniel L., 2013. "Environmental Federalism: A Survey of the Empirical Literature," IZA Discussion Papers 7831, Institute of Labor Economics (IZA).
    9. Giampaolo Garzarelli & Lyndal Keeton, 2016. "Policy Experimentation and Intergovernmental Grants in a Federal System," Working Papers 8/16, Sapienza University of Rome, DISS.
    10. Pankaj C. Patel, 2022. "Recentralization and self‐employment: A quasi‐natural experiment in Switzerland," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1379-1402, July.
    11. Tinghua Yu, 2021. "Intrinsic Motivation, Office Incentives, and Innovation," BCAM Working Papers 2106, Birkbeck Centre for Applied Macroeconomics.
    12. Tinghua Yu, 2021. "Accountability and learning with motivated agents," BCAM Working Papers 2107, Birkbeck Centre for Applied Macroeconomics.
    13. Tinghua Yu, 2022. "Accountability and learning with motivated agents," Journal of Theoretical Politics, , vol. 34(2), pages 313-329, April.
    14. Cheng, Chen & Xing, Yiqing, 2023. "A screening perspective on experimental zones," China Economic Review, Elsevier, vol. 77(C).
    15. Bowen, T. Renee & Anesi, Vincent, 2018. "Policy Experimentation, Redistribution and Voting Rules," CEPR Discussion Papers 12797, C.E.P.R. Discussion Papers.
    16. Kai A. Konrad & Marcel Thum, 2021. "Der Vorteil des Experimentierens in der Pandemie," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(8), pages 603-605, August.
    17. Yongqiang Chu & Shuguang Shen, 2022. "Adoption of Major Housing Adaptation Policy Innovation for Older Adults by Provincial Governments in China: The Case of Existing Multifamily Dwelling Elevator Retrofit Projects," IJERPH, MDPI, vol. 19(10), pages 1-14, May.
    18. Xie, Yinxi & Xie, Yang, 2017. "Machiavellian experimentation," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 685-711.
    19. Volker Britz & Hans Gersbach, 2020. "Information sharing in democratic mechanisms," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(2), pages 547-577, June.
    20. Johannes Becker & Ronald B. Davies, 2015. "Learning to Tax ?- Interjurisdictional Tax Competition under Incomplete Information," Working Papers 201519, School of Economics, University College Dublin.

    More about this item

    Keywords

    Decentralization; Innovation; Policy experiments; Voting; Information;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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