The Political Economy of Compensatory Federalism
48 Pages Posted: 4 Oct 2017
Date Written: September 29, 2017
To what extent does the federal structure of policymaking in the United States mitigate or exacerbate national political conflict? We develop a model of two-level governance in a federal system in the presence of interstate preference heterogeneity and cross-state externalities. The key underlying intuition is that states with high demand for public spending or regulation are better positioned to adjust state-level policies to compensate for perceived inadequacies in national policy than corresponding states with low demand. We explore the normative and behavioral implications of this asymmetry under majoritarian and supermajoritarian national policymaking institutions, and use the model to account for a number of empirical regularities in U.S. politics and policymaking.
Keywords: Federalism, polarization, conflict, supermajoritarian
JEL Classification: D78, H77, H23
Suggested Citation: Suggested Citation