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A Dynamic Federalism Test

Author

Listed:
  • Colliard, Jean-Edouard

    (HEC Paris - Finance Department)

  • Steinbach, Armin

    (HEC Paris; Max Planck Institute for Research on Collective Goods)

Abstract

Federalism notoriously struggles with the allocation of competences between the federal and sub-federal levels. Legal doctrines vary across jurisdictions in how they allocate authority. From an efficiency perspective, the allocation is determined through a "federalism test" comparing the efficiency of each level of government. This comparison is difficult because which allocation will be more efficient in the future is uncertain and potentially endogenous to the current allocation. We formally define efficiency in such a context, show that a "static" federalism test that neglects endogeneity can fail to implement the efficient allocation, and propose a "dynamic" test to address the issue. We discuss the relevance of our results in light of jurisprudence in different policy areas.

Suggested Citation

  • Colliard, Jean-Edouard & Steinbach, Armin, 2025. "A Dynamic Federalism Test," HEC Research Papers Series 1587, HEC Paris.
    • Handle: RePEc:ebg:heccah:1587
    DOI: 10.2139/ssrn.5717305
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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • K19 - Law and Economics - - Basic Areas of Law - - - Other
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law

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