Details
| Original language | English |
|---|---|
| Pages (from-to) | 1047-1065 |
| Number of pages | 19 |
| Journal | Economic inquiry |
| Volume | 59 |
| Issue number | 3 |
| Early online date | 24 Feb 2021 |
| Publication status | Published - 27 May 2021 |
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.
Keywords
- evolutionary stability, labor mobility, laboratory federalism, public funds sharing, redistribution
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Economic inquiry, Vol. 59, No. 3, 27.05.2021, p. 1047-1065.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Laboratory federalism with public funds sharing
AU - Ania, Ana B.
AU - Wagener, Andreas
PY - 2021/5/27
Y1 - 2021/5/27
N2 - 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.
AB - 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.
KW - evolutionary stability
KW - labor mobility
KW - laboratory federalism
KW - public funds sharing
KW - redistribution
UR - http://www.scopus.com/inward/record.url?scp=85101216566&partnerID=8YFLogxK
U2 - 10.1111/ecin.12971
DO - 10.1111/ecin.12971
M3 - Article
AN - SCOPUS:85101216566
VL - 59
SP - 1047
EP - 1065
JO - Economic inquiry
JF - Economic inquiry
SN - 0095-2583
IS - 3
ER -