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The Impact of Referendums on the Centralisation of Public Goods Provision: A Political Economy Approach

41 Pages Posted: 6 Oct 2006  

Jan Schnellenbach

BTU Cottbus-Senftenberg, Institute for Economics, Chair for Microeconomics; Walter Eucken Institute

Lars P. Feld

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences; CESifo (Center for Economic Studies and Ifo Institute)

Christoph A. Schaltegger

University of St. Gallen - CREMA

Date Written: September 2006

Abstract

The paper compares decision-making on the centralisation of public goods provision in the presence of regional externalities under representative and direct democratic institutions. A model with two regions, two public goods and regional spillovers is developed in which uncertainty over the true preferences of candidates makes strategic delegation impossible. Instead, it is shown that the existence of rent extraction by delegates alone suffices to make cooperative centralisation more likely through representative democracy. In the non-cooperative case, the more extensive possibilities for institutional design under representative democracy increase the likelihood of centralisation. Direct democracy may thus be interpreted as a federalism-preserving institution.

Keywords: centralisation, direct democracy, representative democracy, public good provision

JEL Classification: H73, H77, D78

Suggested Citation

Schnellenbach, Jan and Feld, Lars P. and Schaltegger, Christoph A., The Impact of Referendums on the Centralisation of Public Goods Provision: A Political Economy Approach (September 2006). CESifo Working Paper Series No. 1803. Available at SSRN: https://ssrn.com/abstract=935029

Jan Schnellenbach

BTU Cottbus-Senftenberg, Institute for Economics, Chair for Microeconomics ( email )

Erich-Weinert-Str. 1
Cottbus, 03046
Germany

HOME PAGE: http://https://www.b-tu.de/fg-vwl-mikro/team/prof-dr-jan-schnellenbach

Walter Eucken Institute ( email )

Goethestr. 10
Freiburg, 79100
Germany

HOME PAGE: http://www.eucken.de

Lars Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-Württemberg D-79100
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Christoph Schaltegger

University of St. Gallen - CREMA ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

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