When is two better than one? How federalism mitigates and intensifies imperfect political competition

Abstract

JEL Classifications: D72, H11, D60 Keywords: optimal federalism, imperfect political competition, intergovernmental competitionThe current paper models power-maximizing politicians' behavior subject to imperfect political competition and perfect citizen mobility. It then analyzes the welfare implications of federal and non-federal structures. The model abstracts from both heterogeneous preferences (the most common argument in favor of federalism) and externalities (the most common argument against), showing that even in this simplified setting federalism has important welfare implications. There is one class of equilibria in which more federalism has the purely beneficial effect of offsetting imperfections in the political process. However, there is also a second class of equilibria in which citizen mobility makes political imperfections more severe by creating "safe districts" for both political parties.

Strategic institutional choice: Voters, states, and congressional term limits

“…For example, federal law currently prohibits states from adopting certain political institutions that have spillover effects, but allows states to choose many institutions that do not affect other states. Recent theoretical work has shown that limiting the power of direct democracy within multiple jurisdictions can result in greater centralization of policy choice (Redoano and Scharf, 2004), and the welfare effects of such policy centralization will depend on the intensity of voters' preferences for constraining representatives (Caplan, 2001). Our results provide some evidence on the intensity of such preferences, but invite a similar efficiency analysis of centralizing institutional choice.…”

Horizontal competition in multilevel governmental settings

“…central city in a metropolitan area. In the remaining three - Caplan (2001), Brosio and Revelli (2003), and Brueckner and Glazer (2008), the main actors are directly the (median) voters.…”

“…I will just note that Glaeser and Shleifer do not analyze the economic and electoral spillovers of central-city policies on other jurisdictions, in particular those located in the periphery.The three other papers reason directly on median voter policies. InCaplan (2001), voters are loyal to one of two parties, Democrats and Republicans, but have a different…”

Federalism and Public Choice

“…(Glaeser & Schleifer 2005). Bryan Caplan argues that voters themselves might migrate to jurisdictions with majorities of citizens sharing their political affiliation (Caplan 2001). Alain Mingat and Pierre Salmon argue that politicians might shape their constituency by adopting "Left" or "Right" policies that will induce the disfavored constrituent to emigrate and the favored constituent to immigrate to the jurisdiction (Mintgat & Salmon 1982).…”