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Decentralization via Federal and Unitary Referenda
Author(s) -
Lockwood Ben
Publication year - 2004
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2004.00158.x
Subject(s) - unitary state , referendum , inefficiency , decentralization , economics , scale (ratio) , politics , mathematical economics , econometrics , public economics , microeconomics , political science , law , geography , market economy , cartography
Abstract This paper studies a model where the power to set policy (a choice of project) may be assigned to central or regional government via either a federal or unitary referendum. The benefit of central provision is an economy of scale, while the cost is political inefficiency. The relationship between federal and unitary referenda is characterized in the asymptotic case as the number of regions becomes large, under the assumption that the median project benefit in any region is a random draw from a fixed distribution, G . Under some symmetry assumptions, the relationship depends only on the shape of G , not on how willingness to pay is distributed within regions. The relationship to Cremer and Palfrey's “principle of aggregation” is established. Asymptotic results on the efficiency of the two referenda are also proved.