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Federalism's Values and the Value of Federalism

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  • Robert P. Inman

Abstract

What is it about federal governance that makes it so attractive to economists, political philosophers, and legal scholars and is there any evidence that would suggest all this attention is warranted? Proponents see federalism as a means to more efficient public and private economies, as the foundation for increased political participation and democratic stability, and as important check on governmental abuses of personal rights and liberties. This study provides a working definition of federal governance and classifies a sample of 73 countries as either a constitutionally-based federal democracy, an administratively-based federal democracy, a unitary democracy, a federal dictatorship, or a unitary dictatorship. Governance is then related to eleven measures of economic, democratic, and rights performance. Three conclusions follow. First, decentralized policy-making does have a unique contribution to make to a society's ability to enforce property rights, to protect political and civil rights, and then because of such rights protections, to enhance private sector economic performance. Second, while policy decentralization is the key to federalism's strong rights and economic performance and can be achieved within a unitary government by fiat, constitutionally established provincial (or state) governments provide an extra and important protective barrier for policy decentralization. Federal institutions protect policy decentralization, and policy decentralization provides federalism's valued outcomes. Third, federalism needs democracy; there is no evidence that adding policy decentralization or provinces to a dictatorship significantly improves a dictatorship's economic or rights performance.

Suggested Citation

  • Robert P. Inman, 2008. "Federalism's Values and the Value of Federalism," NBER Working Papers 13735, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13735
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    2. Liesbet Hooghe & Gary Marks, 2012. "Beyond Federalism - Estimating and Explaining the Territorial Structure of Government," KFG Working Papers p0037, Free University Berlin.
    3. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
    4. International Monetary Fund, 2008. "Austria; Selected Issues," IMF Staff Country Reports 2008/189, International Monetary Fund.
    5. Montolio, Daniel & Trillas, Francesc, 2013. "Regulatory federalism and industrial policy in broadband telecommunications," Information Economics and Policy, Elsevier, vol. 25(1), pages 18-31.

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    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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