Working Paper: CEPR ID: DP3631
Authors: Michela Redoano; Kimberley Ann Scharf
Abstract: This paper analyses policy centralization outcomes in a two-jurisdiction model of public good provision choices with heterogeneous policy preferences and inter-jurisdictional policy spillovers under two alternative political procedures: direct referendum and representative democracy. We show that policy centralization is more likely to occur if the choice to centralize is made by elected policymakers rather than by referendum. In these situations, centralized policies converge to the preferred level of the jurisdiction that least favours centralization, rather than to a compromise between the two jurisdictions? preferred levels.
Keywords: centralization; harmonization
JEL Codes: H00; H20; H70
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| type of democratic procedure (D72) | policy centralization (H77) |
| elected policymakers (D72) | policy centralization (H77) |
| representative democracy (D72) | cooperation from reluctant jurisdiction (K42) |
| policy preferences of reluctant partner (F55) | policies converge (F68) |
| referendum regime (D72) | degree of centralization (H77) |
| budgetary decisions by representatives (H61) | degree of centralization (H77) |