A Voting Model of Federal Standards with Externalities

Creators: Crémer, Jacques; Palfrey, Thomas R.

Abstract

This paper proposes a framework for studying policy making in a federal system in the presence of spillover externalities. Local jurisdictions choose local policies by majority rule subject to standards that are set by majority rule at the federal level. We characterize the induced preferences of voters for federal policies, prove existence of local majority rule equilibrium, provide an example of nonexistence of global majority rule equilibrium, and explore the welfare properties of federal standards in the presence of spillovers.

Additional Information

Revised version. Original dated to April 29, 2003. We are grateful to LEESP, CNRS, and NSF for financial support. The paper has benefited from discussions with and comments from Jenna Bednar, Antoine Loeper, Hervé Moulin, Norman Schofield, and Barry Weingast. We also wish to acknowledge comments from seminar participants at California Institute of Technology, Harvard University, London School of Economics, New York University, Ohio State University, Princeton University, University of Aix Marseille, University of Malaga, University of Pennsylvania, University of Toulouse, Williams College, and the 2002 meetings of the Public Choice Society. Any remaining shortcomings are our own.

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