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The Political Economy of Policy Centralization: Direct Versus Representative Democracy

  • Michela Redoano
  • Kimberley Ann Scharf

This paper examines policy centralization outcomes in a two-jurisdiction, political economy model of public good provision choices with heterogeneous policy preferences and interjurisdictional policy spillovers, under alternative democratic choice procedures, namely, direct democracy and representative democracy. We show that policy centralization is more likely to occur if the choice to centralize is made by elected policymakers rather than by referendum. The reason for this result is that delegation of the harmonization choice to elected policymakers can effectively act as a policy commitment device by a pro-centralization jurisdiction and induce a reluctant partner to cooperate. In these situations, policy centralization will result in policies converging towards the choice preferred by the reluctant partner, rather than in a dilution of policy preferences.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 602.

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Date of creation: 2001
Date of revision:
Handle: RePEc:ces:ceswps:_602
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  1. repec:oup:restud:v:58:y:1991:i:2:p:391-97 is not listed on IDEAS
  2. Charles Blankart, 2000. "The Process of Government Centralization: A Constitutional View," Constitutional Political Economy, Springer, vol. 11(1), pages 27-39, March.
  3. Gatsios, Konstantine & Karp, Larry, 1995. "Delegation in a general equilibrium model of customs unions," European Economic Review, Elsevier, vol. 39(2), pages 319-333, February.
  4. Amrita Dhillon & Carlo Perroni & Kimberley A. Scharf, . "Implementing Tax Coordination," EPRU Working Paper Series 97-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  5. Chaim Fershtman & Kenneth L. Judd & Ehud Kalai, 1990. "Observable Contracts: Strategic Delegation and Cooperation," Discussion Papers 879, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. repec:oup:qjecon:v:112:y:1997:i:1:p:85-114 is not listed on IDEAS
  7. Besley, Timothy J. & Coate, Stephen, 2000. "Centralized versus Decentralized Provision of Local Public Goods: a Political Economy Analysis," CEPR Discussion Papers 2495, C.E.P.R. Discussion Papers.
  8. Persson, Torsten & Tabellini, Guido, 1994. "Does centralization increase the size of government?," European Economic Review, Elsevier, vol. 38(3-4), pages 765-773, April.
  9. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
  10. repec:oup:qjecon:v:111:y:1996:i:1:p:65-96 is not listed on IDEAS
  11. repec:oup:restud:v:59:y:1992:i:4:p:689-701 is not listed on IDEAS
  12. Christoph A. Schaltegger & Lars P. Feld, 2001. "On Government Centralization and Budget Referendums: Evidence from Switzerland," CESifo Working Paper Series 615, CESifo Group Munich.
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