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Discussion Papers, Kellogg School of Management, Northwestern University >
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http://hdl.handle.net/10419/59670
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| Title: | | Contractual federalism and strategy-proof coordination  |
| Authors: | | Loeper, Antoine |
| Issue Date: | | 2008 |
| Series/Report no.: | | Discussion Paper, Center for Mathematical Studies in Economics and Management Science 1521 |
| Abstract: | | This paper takes a mechanism design approach to federalism and assumes that local preferences are the private information of local jurisdictions. Contractual federalism is defined as a strategy-proof contract among the members of the federation supervised by a benevolent but not omniscient federal authority. We show that even if the size of the information to be elicited is minimal, the incentive compatibility constraint has a bite in terms of flexibility and welfare. Strategy-proof and efficient federal mechanisms are necessarily uniform. There exists inefficient and non-uniform strategy-proof mechanisms, but they are socially worse than non cooperative decentralization. Federal mechanisms which are neutral and robust to coalition manipulations are equivalent to voting rules on uniform policies. |
| Subjects: | | Federalism Asymmetric Information Strategy-proofness Externality Coordination Uniformity |
| JEL: | | D71 D72 D82 H77 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Discussion Papers, Kellogg School of Management, Northwestern University
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