Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22152
Authors: 
Lorz, Jens Oliver
Willmann, Gerald
Year of Publication: 
2004
Series/Report no.: 
CeGE discussion paper 25
Abstract: 
This paper provides a political-economy explanation of the degree of centralization in economic policy making. To determine which policies are to be centralized, regions select representatives who then negotiate the degree of centralization and the regional cost shares of centrally decided policies. We show that the resulting degree of centralization is suboptimally low. Voters strategically delegate to representatives who are averse to public spending and hence prefer decentralized decisions in order to reduce their region's cost share. When spillovers are asymmetric, strategic delegation is stronger at the periphery than at the center.
Subjects: 
Political Economy
Fiscal Federalism
Endogenous Centralization
Constitutional Design
JEL: 
H77
H11
H41
Document Type: 
Working Paper

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