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The Institutions of Federalism: Toward an Analytical Framework

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  • David E. Wildasin

    (University of Kentucky)

Abstract

Mature federations have relatively transparent delineations of authority among levels of government; subnational governments enjoy considerable autonomy in their expenditure, revenue, and debt policies. In other countries, problems of soft budget constraints, bailouts, and fiscal and financial instability demonstrate the difficulties of institutional design in a federation. This paper outlines an analytical framework within which interjurisdictional spillovers may create incentives for higher-level governments to intervene in the control and financing of lower-level governments (bailouts). This framework helps to identify directions for theoretical and empirical research that can illuminate important features of observed institutions and guide policy analysis.

Suggested Citation

  • David E. Wildasin, 2004. "The Institutions of Federalism: Toward an Analytical Framework," Public Economics 0403006, EconWPA.
  • Handle: RePEc:wpa:wuwppe:0403006
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    federalism; bailouts; soft budget constraint; externalities;

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H - Public Economics

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