Working Paper: CEPR ID: DP4808
Authors: Ulrich Erlenmaier; Hans Gersbach
Abstract: In this Paper, we design democratic constitutions that can transcend the shortcomings of the unanimity rule. The constitution embeds the unanimity rule in a set of virtue-supporting principles: (a) broad packages with many public projects (bundling) are allowed, but can only be proposed once in a legislative term; (b) the person who designs the package is also taxed at the highest proposed rate; and (c) subsidies are forbidden. We show that such democratic constitutions can yield efficient public project provision.
Keywords: amendment rules; bundling; constitutions; provision of public projects; unanimity rule
JEL Codes: D62; D70; H40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unanimity rule embedded in constitutional principles (D72) | efficient public project provision (H43) |
| bundling of public projects (H44) | efficient allocation of resources (D61) |
| proposal designer imposes a tax structure (H20) | net positive utility for society (D69) |
| amendment rule (K10) | elimination of strategic voting (D79) |
| amendment rule (K10) | promotion of socially efficient packages (D61) |
| bundling of projects and tax adjustments (H20) | minimize tax distortions (H21) |