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Decentralized redistribution in a laboratory federation

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  • Ania, Ana B.
  • Wagener, Andreas
Abstract
The idea of laboratory federalism provides a strong argument in favor of fiscal decentralization. It views autonomous jurisdictions in a federation as laboratories where new policies can be tested at low risk for the entire system. If successful, these policies will spread out by imitation; otherwise, they will be discarded. Studying this idea in a dynamic setting of fiscal competition, we show that, due to externalities between jurisdictions, policies that appear successful and are therefore mimicked do not necessarily enhance welfare, and vice versa. Specifically, in the classical framework of decentralized, rich-to-poor income redistribution with labor mobility the long-run outcome entails a complete breakdown of redistribution with zero subsidies to the poor everywhere.

Suggested Citation

  • Ania, Ana B. & Wagener, Andreas, 2016. "Decentralized redistribution in a laboratory federation," Journal of Urban Economics, Elsevier, vol. 93(C), pages 49-59.
    • Handle: RePEc:eee:juecon:v:93:y:2016:i:c:p:49-59
    DOI: 10.1016/j.jue.2016.03.002
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    Cited by:

    1. Ana B. Ania & Andreas Wagener, 2021. "Laboratory federalism with public funds sharing," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1047-1065, July.
    2. Floriana Cerniglia; Riccarda Longaretti; Alberto Zanardi, 2020. "The Emergence of Asymmetric Decentralization: Centrifugal and Centripetal Forces," CRANEC - Working Papers del Centro di Ricerche in Analisi economica e sviluppo economico internazionale crn2001, Università Cattolica del Sacro Cuore, Centro di Ricerche in Analisi economica e sviluppo economico internazionale (CRANEC).
    3. Ana B. Ania & Andreas Wagener, 2021. "Laboratory federalism with public funds sharing," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1047-1065, July.
    4. Qian, Jinbao & Li, Linmu, 2024. "“Laboratory nationalism”: Policy innovation in China," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).

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    More about this item

    Keywords

    Laboratory federalism; Mobility; Redistribution; Asymmetric ESS;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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