Laboratory federalism with public funds sharing
- Author(s)
- Ana Begona Ania Martinez, Andreas Wagener
- Abstract
Laboratory federalism hypothesizes that decentralization fosters innovation and learning in multijurisdictional systems, conducing to good policies. We discuss this using evolutionary stability, focusing in this paper on public funds sharing. In a model of rich-to-poor redistribution with labor mobility, where policy choices based on relative success lead to drastic welfare erosion, suitably designed sharing schemes can restore efficiency. Their necessary properties are the same as in a Nash equilibrium, showing they are a powerful corrective device for different modes of government interaction. Two drawbacks appear: reduced accuracy due to large multiplicity and a tendency to overly reward inefficiently high redistribution.
- Organisation(s)
- Department of Economics
- External organisation(s)
- Gottfried Wilhelm Leibniz Universität Hannover
- Journal
- Economic Inquiry
- Volume
- 59
- Pages
- 1047-1065
- No. of pages
- 19
- ISSN
- 0095-2583
- DOI
- https://doi.org/10.1111/ecin.12971
- Publication date
- 02-2021
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502010 Public finance, 502047 Economic theory, 502021 Microeconomics
- Keywords
- ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/laboratory-federalism-with-public-funds-sharing(ac140d04-b1c2-4853-b3fa-5b612813c087).html