Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/17760
Authors: 
Lorz, Jens Oliver
Willmann, Gerald
Year of Publication: 
2004
Series/Report no.: 
Kiel Working Paper 1209
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 cen- tralization is suboptimally low. Voters strategically delegate to repre- sentatives who are averse to public spending and hence prefer decen- tralized decisions in order to reduce their region's cost share. When spill-overs are asymmetric, strategic delegation is stronger at the pe- riphery 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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