Rethinking Federalism

Abstract

The appropriate federal structure of government is now a policy issue of major debate. This paper identifies three approaches and compares their strengths and weaknesses. Economic federalism recommends the use of competitive communities for the provision of congestible local goods and a strong central government for the provision of pure public goods and spillovers. Cooperative federalism recommends intercommunity agreements; democratic federalism prefers a majority-rule representative legislature. Efficiency will sometimes conflict with other constitutional objectives--political participation and the protection of rights--and compromises will often be required.

The Impact of Recentralization on Public Services: A Difference-in-Differences Analysis of the Abolition of Elected Councils in Vietnam

“…Specifically, economists have argued that greater local authority in decision-making improves the efficiency of public service delivery, because government outputs can be provided in small units and tailored directly to local tastes (Besley and Coate 2003;Oates 1972). In addition, decentralization creates competition for capital and labor, leading to improved gov-ernance outcomes; brings decision-making closer to citizens; and limits the role of central government intervention in economic performance (Inman and Rubinfeld 1997;Tiebout 1956). Lab experiments by Walker et al (2000) and Kroll et al (2007) provide suggestive evidence for the link between direct democracy and efficient public good provision under ideal conditions.…”

Positive constitutional economics II—a survey of recent developments

“…They then ask on what governmental level public goods will be (optimally) provided taking externalities explicitly into account. This approach need thus not concern us here (for surveys, see Inman/Rubinfeld 1997;Oates 1999Oates , 2005. 30 Further, as we are interested in the economic effects of constitutions, we propose to distinguish between federalism on the one hand and (fiscal) decentralization on the other.…”

European System of Private Laws: An Economic Perspective

“…However, from an economic perspective public law has always been viewed with suspicion, due to its dangerous potential 3 See, e.g., Eucken (1952), Cooter and Ulen (2004), and Furubotn and Richter (1997). 4 For the economic theory of federalism see Breton (1996), Inman andRubinfeld (1997), andOates (1999); for theories of interjurisdictional competition see Tiebout (1956), Kenyon andKincaid (1991), andFeld (2000); for theories of systems competition and regulatory competition see, e.g., Vanberg and Kerber (1994), Bratton and McCahery (1997), Sun and Pelkmans (1995), Esty and Gerardin (2001a); for an economic approach to legal federalism see Easterbrook (1994), Van den Bergh (1996), Kerber and Heine (2002), and Grundmann and Kerber (2002).…”