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Optimal Territorial Scope of LawsEmanuela CarbonaraUniversity of Bologna - Department of Economics Barbara LuppiUniversità degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; University of St. Thomas School of Law Francesco ParisiUniversity 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 Abstract: 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, P16 Accepted Paper SeriesDate posted: November 21, 2008Suggested CitationContact Information
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