Publication

This paper provides a political-economy explanation of the degree of centralization in economic policymaking. The authors argue that to determine which policies are to be centralized, regions select representatives who then negotiate the degree of centralization and the regional cost shares of centrally decided policies. They show that centralization is suboptimally low and voters strategically delegate to representatives who are avers to public spending and hence prefer decentralized decisions. They hold that when spill-overs are asymmetric, strategic delegation is stronger at the periphery than at the center.