Pooling Sovereignty and Subsidiarity Principle
This paper focuses on the choice of centralization of public policy in an economy with two government levels. It argues that centralization by subsidiarity principle stresses a conflicting interest between different jurisdictions instead of working it out. The extent of the conflict of interest is affected by spillovers and differences in public spending tastes. Spending decisions are made by negotiation in the centralized legislature of local representatives, unless they fail to reach an agreement. In the latter case, policy is provided non-cooperatively by local governments. Results show that pooling sovereignty by subsidiarity principle fails to fully internalize spillovers and may produce misallocation of public resources.
|Date of creation:||Jan 2009|
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