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The Impact of Referendums on the Centralisation of Public Goods Provision: A Political Economy Approach

  • Jan Schnellenbach
  • Lars P. Feld
  • Christoph A. Schaltegger

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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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1803.

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Date of creation: 2006
Date of revision:
Handle: RePEc:ces:ceswps:_1803
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  1. Robert A.J. Dur & Hein J. Roelfsema, 2002. "Why does Centralisation fail to internalise Policy Externalities?," Tinbergen Institute Discussion Papers 02-056/3, Tinbergen Institute, revised 11 Nov 2003.
  2. Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-30, March.
  3. Alesina, Alberto, 1988. "Credibility and Policy Convergence in a Two-Party System with Rational Voters," American Economic Review, American Economic Association, vol. 78(4), pages 796-805, September.
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  7. Thomas Gilligan & John Matsusaka, 2006. "Public choice principles of redistricting," Public Choice, Springer, vol. 129(3), pages 381-398, December.
  8. Gilligan, Thomas W & Matsusaka, John G, 1999. " Structural Constraints on Partisan Bias under the Efficient Gerrymander," Public Choice, Springer, vol. 100(1-2), pages 65-84, July.
  9. repec:oup:qjecon:v:111:y:1996:i:1:p:65-96 is not listed on IDEAS
  10. Matsusaka, John G & McCarty, Nolan M, 2001. "Political Resource Allocation: Benefits and Costs of Voter Initiatives," Journal of Law, Economics and Organization, Oxford University Press, vol. 17(2), pages 413-48, October.
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  12. Redoano, Michela & Scharf, Kimberly A., 2004. "The political economy of policy centralization: direct versus representative democracy," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 799-817, March.
  13. repec:oup:qjecon:v:112:y:1997:i:4:p:1027-56 is not listed on IDEAS
  14. Charles Blankart, 2000. "The Process of Government Centralization: A Constitutional View," Constitutional Political Economy, Springer, vol. 11(1), pages 27-39, March.
  15. Lorz, Jens Oliver & Willmann, Gerald, 2004. "On the Endogenous Allocation of Decision Powers in Federal Structures," Center for European, Governance and Economic Development Research Discussion Papers 25, University of Goettingen, Department of Economics.
  16. repec:oup:qjecon:v:112:y:1997:i:1:p:85-114 is not listed on IDEAS
  17. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Preserving Market Incentives," Working Papers 97042, Stanford University, Department of Economics.
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