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  3. American Economic Journal: Microeconomics
  4. August 2019
  5. Laboratories of Democracy: Policy Experimentation under Decentralization

Laboratories of Democracy: Policy Experimentation under Decentralization

  • Chen Cheng
  • Christopher Li
American Economic Journal: Microeconomics
vol. 11, no. 3, August 2019
(pp. 125-54)
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Abstract

We 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 policymaking 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.

Citation

Cheng, Chen, and Christopher Li. 2019. "Laboratories of Democracy: Policy Experimentation under Decentralization." American Economic Journal: Microeconomics, 11 (3): 125-54. DOI: 10.1257/mic.20160257

Additional Materials

JEL Classification

  • D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
  • D78 Positive Analysis of Policy Formulation and Implementation
  • D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
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