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Civil conflict, federalism and strategic delegation of leadership

  • Jennings, Colin
  • Roelfsema, Hein

This article analyzes negative externalities that policymakers in one region or group may impose upon the citizens of neighboring regions or groups. These externalities may be material, but they may also be psychological (in the form of envy). The latter form of externality may arise from the production of `conspicuous' public goods. As a result, decentralized provision of conspicuous public goods may be too high. Potentially, a centralized legislature may internalize negative externalities. However, in a model with strategic delegation, we argue that the median voter in each jurisdiction may anticipate a reduction in local public goods supply and delegate to a policymaker who cares more for public goods than she does herself. This last effect mitigates the expected benefits of policy centralization. The authors' theory is then applied to the setting of civil conflict, where they discuss electoral outcomes in Northern Ireland and Yugoslavia before and after significant institutional changes that affected the degree of centralization. These case studies provide support for the authors' theoretical predictions.

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File URL: http://hdl.handle.net/10943/29
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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2008-16.

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Date of creation: 2008
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Handle: RePEc:edn:sirdps:29
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  16. Andrew B. Abel, 1990. "Asset Prices under Habit Formation and Catching up with the Joneses," NBER Working Papers 3279, National Bureau of Economic Research, Inc.
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