Policy Innovation, Decentralised Experimentation, and Laboratory Federalism

19 Pages Posted: 16 Nov 2008

See all articles by Nicole J. Saam

Nicole J. Saam

University of Erfurt

Wolfgang Kerber

University of Marburg - School of Business & Economics

Date Written: September 12, 2008

Abstract

Decentralised experimentation and mutual learning of public policies is seen as one of the important advantages of federal systems (Oates: laboratory federalism). Based upon Hayekian ideas of the advantages of decentralised experimentation (as a discovery procedure), we analyse the long-term benefits of parallel experimentation in a federal system from an evolutionary economics perspective. We present a simulation model in which the lower level jurisdictions in a federal system experiment with randomly chosen policy innovations and can imitate the relatively best solutions. The simulations confirm our hypotheses that a higher degree of decentralisation has positive effects on the long-term accumulation of knowledge of suitable policy solutions and also limits risks through better protection against erroneous policies. Both problems of policy learning and trade offs with (static and dynamic) advantages of centralisation are taken into account.

Keywords: Laboratory Federalism, Policy Learning, Policy Innovation, Decentralisation

JEL Classification: H11, H7, O1

Suggested Citation

Saam, Nicole J. and Kerber, Wolfgang, Policy Innovation, Decentralised Experimentation, and Laboratory Federalism (September 12, 2008). Available at SSRN: https://ssrn.com/abstract=1301502 or http://dx.doi.org/10.2139/ssrn.1301502

Nicole J. Saam

University of Erfurt ( email )

Faculty of Economics, Law and Social Sciences
Nordhäuser Str. 63
D-99089 Erfurt
Germany

HOME PAGE: http://www.uni-erfurt.de/esf

Wolfgang Kerber (Contact Author)

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany
+49 6421 2823921 (Phone)

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