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The impact of referendums on the centralisation of public goods provision: a political economy approach

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  • Jan Schnellenbach

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  • Lars Feld

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  • Christoph Schaltegger

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Abstract

The paper compares decision-making on the centralisation of public goods provision in the presence of regional externalities under representative and direct democratic institutions. A model with two regions, two public goods and regional spillovers is developed in which uncertainty over the true preferences of candidates makes strategic delegation impossible. Instead, it is shown that the existence of rent extraction by delegates alone suffices to make cooperative centralisation more likely through representative democracy. In the non-cooperative case, the more extensive possibilities for institutional design under representative democracy increase the likelihood of centralisation. Direct democracy may thus be interpreted as a federalism-preserving institution.
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Suggested Citation

  • Jan Schnellenbach & Lars Feld & Christoph Schaltegger, 2010. "The impact of referendums on the centralisation of public goods provision: a political economy approach," Economics of Governance, Springer, vol. 11(1), pages 3-26, February.
  • Handle: RePEc:spr:ecogov:v:11:y:2010:i:1:p:3-26 DOI: 10.1007/s10101-009-0063-1
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Martin Gregor, 2013. "Modeling positive inter-jurisdictional public spending spillovers," EcoMod2013 5193, EcoMod.
    2. Martin Gregor & Lenka Stastna, 2012. "The decentralization tradeoff for complementary spillovers," Review of Economic Design, Springer;Society for Economic Design, vol. 16(1), pages 41-69, March.
    3. Libman, Alexander, 2010. "Constitutions, regulations, and taxes: Contradictions of different aspects of decentralization," Frankfurt School - Working Paper Series 138, Frankfurt School of Finance and Management.
    4. Feld, Lars P., 2014. "James Buchanan's theory of federalism: From fiscal equity to the ideal political order," Freiburg Discussion Papers on Constitutional Economics 14/06, Walter Eucken Institut e.V..
    5. Lars Feld, 2014. "James Buchanan’s theory of federalism: from fiscal equity to the ideal political order," Constitutional Political Economy, Springer, pages 231-252.
    6. Galletta, Sergio & Jametti, Mario, 2015. "How to tame two Leviathans? Revisiting the effect of direct democracy on local public expenditure in a federation," European Journal of Political Economy, Elsevier, vol. 39(C), pages 82-93.
    7. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах
      [ENDOGENOUS BOUNDARIES AND DISTRIBUTION OF POWER In the Federation]
      ," MPRA Paper 16473, University Library of Munich, Germany.
    8. Libman, Alexander, 2010. "Constitutions, regulations, and taxes: Contradictions of different aspects of decentralization," Journal of Comparative Economics, Elsevier, pages 395-418.
    9. Lars P. Feld & Justina A.V. Fischer & Gebhard Kirchgässner, 2010. "The Effect Of Direct Democracy On Income Redistribution: Evidence For Switzerland," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 817-840, October.
    10. Lisa Grazzini & Alessandro Petretto, 2012. "Voting on devolution in a federal country with a bicameral national system," Economics of Governance, Springer, vol. 13(1), pages 51-72, March.
    11. Niklas Potrafke, 2013. "Evidence on the political principal-agent problem from voting on public finance for concert halls," Constitutional Political Economy, Springer, pages 215-238.
    12. Libman, Alexander, 2009. "Constitutions, Regulations, and Taxes: Contradictions of Different Aspects of Decentralization," MPRA Paper 15854, University Library of Munich, Germany.
    13. Libman, Alexander, 2008. "Endogenous (De)Centralization and the Russian Federalism," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 9(1), pages 23-57.
    14. Di Liddo, Giuseppe, 2017. "Are local agreements on equalization grants possible? A bargaining model with quasi-linear local preferences on local public goods," Economics Letters, Elsevier, vol. 153(C), pages 9-11.
    15. Thushyanthan Baskaran & Lars P. Feld & Jan Schnellenbach, 2014. "Fiscal Federalism, Decentralization and Economic Growth: Survey and Meta-Analysis," CESifo Working Paper Series 4985, CESifo Group Munich.
    16. Feld, Lars P. & Fischer, Justina A.V. & Kirchgaessner, Gebhard, 2007. "The Effect of Direct Democratic Institutions on Income Redistribution: Evidence for Switzerland," SSE/EFI Working Paper Series in Economics and Finance 689, Stockholm School of Economics.
    17. Thomas Döring & Jan Schnellenbach, 2011. "A tale of two federalisms: Germany, the United States and the ubiquity of centralization," Constitutional Political Economy, Springer, pages 83-102.
    18. Martin Gregor, 2016. "A three-stage model of inter-jurisdictional public spending spillovers," Letters in Spatial and Resource Sciences, Springer, pages 201-217.
    19. Martin Gregor, 2012. "Modeling positive inter-jurisdictional public spending spillovers," Working Papers IES 2012/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2012.
    20. Alexander Libman, 2015. "Words or deeds: what matters? On the role of symbolic action in political decentralization," Empirical Economics, Springer, pages 801-838.
    21. Janos Feidler & Klaas Staal, 2012. "Centralized and decentralized provision of public goods," Economics of Governance, Springer, vol. 13(1), pages 73-93, March.

    More about this item

    Keywords

    Centralisation; Direct democracy; Representative democracy; Public good provision; H11; H77; H72; H73;

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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