Communication in Federal Politics: Universalism, Policy Uniformity, and the Optimal Allocation of Fiscal Authority

42 Pages Posted: 26 Jul 2010

See all articles by Anke S. Kessler

Anke S. Kessler

Simon Fraser University (SFU) - Department of Economics; University of Bonn - Economic Science Area; Centre for Economic Policy Research (CEPR)

Date Written: July 2010

Abstract

The paper presents a positive model of communication in federal legislatures to study the incentives of members to engage in a meaningful exchange of information, and how this shapes policy outcomes. Depending on the type of policy under consideration, communication between delegates generally suffers from a bias that make truthful revelation difficult and sometimes impossible. This generates inefficient policy choices at the federal level that are often are endogenously characterized by overspending, universalism and uniformity. Building on these findings, I develop a simple theory of fiscal (de-)centralization, which revisits Oates' decentralization theorem in a world of incomplete information and strategic communication. Empirical results from a cross section of U.S. municipalities strongly support the predicted pattern of spending.

Keywords: Communication, Debate, Fiscal Federalism, Legislative Behavior, Universalism

JEL Classification: D72, D82, H50, H77

Suggested Citation

Kessler, Anke S., Communication in Federal Politics: Universalism, Policy Uniformity, and the Optimal Allocation of Fiscal Authority (July 2010). CEPR Discussion Paper No. DP7910. Available at SSRN: https://ssrn.com/abstract=1647504

Anke S. Kessler (Contact Author)

Simon Fraser University (SFU) - Department of Economics ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada
604-291-3443 (Phone)
604-291-5944 (Fax)

University of Bonn - Economic Science Area ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany
+49 228 739 246 (Phone)
+49 228 739 221 (Fax)

HOME PAGE: http://www.wipol.uni-bonn.de/~kessler/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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