Bulletin n. 1/2015
June 2015
CONTENTS
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
    • Callander Steven, Harstad Bård
    Experimentation in Federal Systems
    in Quarterly Journal of Economics (The) , Volume 130 Issue 2 May 2015 ,  2015 ,  951-1002
    We develop a model of policy experimentation in federal systems in which heterogeneous districts choose both whether to experiment and the policies to experiment with. The prospect of informational spillovers implies that in the first best the districts converge in their policy choice. Strikingly, when authority is decentralized, the equilibrium predicts the opposite. The districts use their policy choice to discourage other districts from free-riding on them, thereby inefficiently minimizing informational spillovers. To address this failure, we introduce a dynamic form of federalism in which the central government harmonizes policy choices only after the districts have experimented. This progressive concentration of power induces a policy tournament that can increase the incentive to experiment and encourage policy convergence. We compare outcomes under the different systems and derive the optimal levels of district heterogeneity.
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