Journal of Economic Perspectives: Vol. 11 No. 4 (Fall 1997)


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Federalism as a Commitment to Reserving Market Incentives

Article Citation

Qian, Yingyi, and Barry R. Weingast. 1997. "Federalism as a Commitment to Reserving Market Incentives." Journal of Economic Perspectives, 11(4): 83-92.

DOI: 10.1257/jep.11.4.83


The authors advance a new perspective in the study of federalism. Their approach views federalism as a governance solution of the state to credibly preserving market incentives. Market incentives are preserved if the state is credibly prevented from compromising on future economic success and from bailing out future failures. The salient features of federalism--decentralization of information and authority and interjurisdictional competition--help provide credible commitment or these purposes. In addition, the authors suggest that some federalism are self-sustaining.

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Qian, Yingyi (Hoover Institution)
Weingast, Barry R. (Stanford U)

JEL Classifications

H11: Structure, Scope, and Performance of Government
H77: Intergovernmental Relations; Federalism; Secession


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