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Federal Directives, Local Discretion and the Majority Rule

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  • Antoine Loeper

Abstract

We consider a federation in which citizens determine by federal majority rule a discretionary policy space which partially restricts the sovereignty of member states. Citizens first vote on the size of the discretionary space (the degree of local discretion), and then on its location on the policy space (the federal directive). Finally, each state votes on its respective policy within the discretionary space. This federal mechanism allows voters to express directly their trade-o¤ between flexibility and policy harmonization. We show that at the voting equilibrium, the federal directive is negatively sensitive to the preferences of nonmedian voters. Moreover, the degree of local discretion is too limited and insufficiently sensitive to the magnitude of externalities. Hence, the model shows that inadequate and excessively rigid federal interventions can emerge from a neutral and democratic decision process without agency costs or informational imperfections.

Suggested Citation

  • Antoine Loeper, 2010. "Federal Directives, Local Discretion and the Majority Rule," Discussion Papers 1522, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:1522
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    References listed on IDEAS

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    1. Monheim-Helstroffer, Jenny & Obidzinski, Marie, 2010. "Optimal discretion in asylum lawmaking," International Review of Law and Economics, Elsevier, pages 86-97.
    2. Villas-Boas, J. Miguel, 1997. "Comparative Statics of Fixed Points," Journal of Economic Theory, Elsevier, vol. 73(1), pages 183-198, March.
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    Cited by:

    1. Crettez Bertrand & Deffains Bruno & Musy Olivier, 2016. "Convergence of Legal Rules: Comparing Cooperative and Non-Cooperative Processes," Review of Law & Economics, De Gruyter, vol. 12(1), pages 13-35, March.

    More about this item

    Keywords

    Federalism; Local Discretion; Directive; Partial Decentralization; Majority rule. JEL Classification Numbers: H77; D72;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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