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Conspicuous Public Goods and Leadership Selection

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  • C. Jennings
  • H.J. Roelfsema

Abstract

If voters care for the relative supply of public goods compared to otherjurisdictions, decentralized provision of public goods will be too high.Potentially, centralization internalizes the negative externalities fromthe production of these `conspicuous' public goods. However, in amodel of strategic delegation of policy making, we show that in thedecentralized policy making case the median voter may delegate to apolitician who cares less for conspicuous public goods than she doesherself. By doing so, she commits to lower public goods in the homeand in the foreign country. In contrast, with centralization the medianvoter anticipates the reduction in public goods supply by delegating toa policy maker who cares more for public goods than she does herself.This last effect mitigates the expected benefits of centralization.

Suggested Citation

  • C. Jennings & H.J. Roelfsema, 2004. "Conspicuous Public Goods and Leadership Selection," Working Papers 04-10, Utrecht School of Economics.
  • Handle: RePEc:use:tkiwps:0410
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    File URL: https://dspace.library.uu.nl/bitstream/handle/1874/309931/04_10.pdf
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    References listed on IDEAS

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    3. Yeung Lewis Chan & Leonid Kogan, 2002. "Catching Up with the Joneses: Heterogeneous Preferences and the Dynamics of Asset Prices," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1255-1285, December.
    4. Robert Dur & Hein Roelfsema, 2005. "Why does centralisation fail to internalise policy externalities?," Public Choice, Springer, vol. 122(3), pages 395-416, March.
    5. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 85-114.
    6. John Y. Campbell & John Cochrane, 1999. "Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 205-251, April.
    7. John Y. Campbell & John H. Cochrane, 1994. "By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior," CRSP working papers 412, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    8. Gali, Jordi, 1994. "Keeping Up with the Joneses: Consumption Externalities, Portfolio Choice, and Asset Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 1-8, February.
    9. Hamlin, Alan & Jennings, Colin, 2007. "Leadership and conflict," Journal of Economic Behavior & Organization, Elsevier, vol. 64(1), pages 49-68, September.
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    Keywords

    Conspicuous goods; strategic delegation; policy centralization;

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