Optimal Territorial Scope of Laws
University of Bologna - Department of Economics
Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; University of St. Thomas School of Law
University of Minnesota - Law School; University of Bologna
November 19, 2008
F. Parisi, V. Fon, SOURCES OF LAW: THE ECONOMICS OF LAWMAKING, Oxford University Press, 2009
Minnesota Legal Studies Research Paper No. 08-44
In this paper we analyze the factors that should be considered when allocating a given policy function at a particular level of government and how these factors affect the growth and evolution of multi-level governments. After discussing the interplay of economies of scale, economies of scope, and heterogeneity of preferences in determining the optimal level of legal intervention, we show that the subsidiarity principle can have mixed effects as a firewall against progressive centralization. Our economic model of subsidiarity reveals that once some functions become centralized, further centralization becomes easier and often unavoidable. Contrary to its intended function, a piecemeal application of the subsidiarity principle can trigger a path-dependent avalanche of centralization, turning subsidiarity into a self-defeating statement of principle.
Number of Pages in PDF File: 24
Keywords: Subsidiarity, Rule Competition, Centralization, Economies of Scope
JEL Classification: D70, H73, K33, P16Accepted Paper Series
Date posted: November 21, 2008
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