Combining Federalism and Decentralization

Abstract

Studies evaluating the effects of territorial state organization on the performance of democratic political systems produce ambiguous results. The authors argue that research so far has suffered from insufficiently conceptualizing federalism and decentralization as two distinct dimensions. This article makes use of the advantages of a nested design and detects micro-level causal mechanisms underlying statistically confirmed effects. The authors conduct in-depth case studies comparing policy processes in four countries (Austria, Switzerland, Ireland, and Denmark) in the area of regional development policy, an area that exhibits typical effects in a macro-quantitative analysis, to back their hypothesized and corroborated macro-level relationships by micro level causal evidence. The case studies show that federalism induces subnational actors to adopt divergent positions and push through individual interests in processes of decision making, thus increasing transaction costs and preventing substantial policy shifts. Decentralization and subnational discretion induces actors to vary service delivery in an efficiency-enhancing way.