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Regular version of the site

Working paper

Политическая децентрализация и политические эксперименты

Hongbin C., Treisman D.
Since 1932, when Justice Louis Brandeis remarked that in a federal system states can serve as “laboratories” of democracy, political decentralization has been thought to stimulate policy experimentation. We reexamine the political economy behind this belief, using a simple model of voting in centralized and decentralized democracies. We find the electoral logic suggests the opposite conclusion: centralization usually leads to “too much” policy experimentation, compared to the social optimum, while decentralization leads to “too little”. Three effects of centralization – an “informational externality”, a “riskseeking” effect, and a “risk-conserving” effect – account for the different outcomes.