DP3631 The Political Economy of Policy Centralization: Direct Versus Representative Democracy

Author(s): Michela Redoano, Kimberley Scharf
Publication Date: November 2002
Keyword(s): centralization, harmonization
JEL(s): H20, H70
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3631

This paper analyses policy centralization outcomes in a two-jurisdiction model of public good provision choices with heterogeneous policy preferences and inter-jurisdictional policy spillovers under two alternative political procedures: direct referendum and representative democracy. We show that policy centralization is more likely to occur if the choice to centralize is made by elected policymakers rather than by referendum. In these situations, centralized policies converge to the preferred level of the jurisdiction that least favours centralization, rather than to a compromise between the two jurisdictions? preferred levels.