On the Incentives to Experiment in Federations
Conventional wisdom has it that policy innovation is better promoted in a federal rather than in a unitary system. Recent research, however, has provided theoretical evidence to the contrary: a multi-jurisdictional system is characterized - due to the existence of a horizontal information externality - by under-provision of policy innovation. This paper presents a simple model that introduces political competition for federal office. Under such competition political actors use the innovative policies in order to signal ability to the electorate. In the equilibrium analyzed policy innovation may occur more frequently than in a unitary system. It is thus shown that, once electoral motives are accounted for, the conventional wisdom is likely to be a valid proposition.
|Date of creation:||2005|
|Date of revision:|
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- Strumpf, Koleman S, 2002. " Does Government Decentralization Increase Policy Innovation?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(2), pages 207-41.
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"Political Uncertainty and Policy Innovation,"
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- Kollman, Ken & Miller, John H & Page, Scott E, 2000. "Decentralization and the Search for Policy Solutions," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(1), pages 102-28, April.
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