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Laboratories of Democracy: Policy Experimentation under Decentralization†

Laboratories of Democracy: Policy Experimentation under Decentralization† AbstractWe develop a model of policy experimentation in which the policy decisions of local and national politicians are driven by career concerns. When politicians’ payoffs are convex in their reputation and policy-making is opaque, local politicians experiment by introducing more diverse policies than national politicians do. The welfare implications of decentralization depend on homogeneity between districts. In particular, learning about policies is greater under decentralization if and only if the districts are sufficiently homogeneous. The model delivers novel testable hypotheses. Decentralization should be positively correlated with more diverse (uniform) local policies among countries with opaque (transparent) policymaking. (JEL D72, D78, D83) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Laboratories of Democracy: Policy Experimentation under Decentralization†

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Publisher
American Economic Association
Copyright
Copyright © 2019 © American Economic Association
ISSN
1945-7685
DOI
10.1257/mic.20160257
Publisher site
See Article on Publisher Site

Abstract

AbstractWe develop a model of policy experimentation in which the policy decisions of local and national politicians are driven by career concerns. When politicians’ payoffs are convex in their reputation and policy-making is opaque, local politicians experiment by introducing more diverse policies than national politicians do. The welfare implications of decentralization depend on homogeneity between districts. In particular, learning about policies is greater under decentralization if and only if the districts are sufficiently homogeneous. The model delivers novel testable hypotheses. Decentralization should be positively correlated with more diverse (uniform) local policies among countries with opaque (transparent) policymaking. (JEL D72, D78, D83)

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Aug 1, 2019

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