Economic Federalism Research Articles

Metropolización y gobernanza económica: bases para una propuesta de análisis económico

The possibility of promoting economic development into the territories subjected to metropolization processes, from sub-national governments, is conditioned by the ability of public economic governance. It depends on the institutional design that fixes the territorial distribution of powers of governments to intervene in the markets, as well as the standards set by the economic dynamics in the formation of agglomerations, which limits public action. For a better understanding of the above, it is proposed to develop a body of economic research from three economic streams: spatial economics, evolutionary economic federalism, and institutional economics.

Local Commercialization Incentives

Some patent law scholars have proposed introducing new forms of patents to promote commercialization of inventions that would not otherwise be commercialized, or at least not within a reasonable period of time. In this Article I suggest that so-called commercialization patents are unnecessary because the United States already has a system for promoting commercialization of inventions that does not require creating unprecedented exclusive rights: direct government financing. Drawing on statutes and administrative codes, I provide an in-depth account of the major commercialization financing options for inventors and entrepreneurs at both the federal and the state levels. I then compare these incentives, called commercialization awards, to newly proposed commercialization patents. I show that, like commercialization patents, commercialization awards create strong incentives to commercialize inventions in the near future, and that award administrators employ a variety of strategies, such as strict investment matching requirements, to reduce the risk of wasting public money on projects that are not commercially viable. Based on the insight that non-patent commercialization incentives exist and may be as efficient or more efficient than commercialization patents, I make a novel argument regarding the institutional structure of U.S. patent and innovation policy from the perspective of federalism. I assert that, when the field of commercialization incentives is expanded to include non-patent options such as commercialization awards, state and local governments may be better suited to design and administer these programs. The reason is that – unlike generation of new technological information, which is thought to produce significant geographic spillovers justifying federal intervention in the form of patents – commercialization of inventions produces relatively localized benefits, including not only near-term political benefits like job creation, but also long-term productivity gains as a result of new information derived from the actual practice, production, and marketing of inventions that, at least for a time, remains geographically bound to its place of origin. Thus, according to theories of economic federalism, state and local governments should have superior incentives and superior information to promote commercialization of inventions in their own jurisdictions than the federal government.

An Economic Theory Perspective on Optimal Design of Government of Regional Infrastructure in Australia: The Case of National Transport

Australia is facing a potentially huge need for investment in infrastructure investment in the coming decades to deal with growing population, shifting economic and demographic patterns, and adaptation to sea level rise and other effects of climate change. There is, however, an institutional challenge that is making the necessary financing and investment difficult to come by. The basic problem is that the government institutions responsible for raising revenue and expending it do not match up well with the regions that infrastructure systems serve, regions that typically cross governmental decision-making boundaries.This paper applies an economic theory approach to this problem. The relevant literature in public choice, public economic and fiscal federalism is reviewed to uncover economic thinking about ‘optimal’ government institutional design. Then more specific thinking about infrastructure governance is discussed. A consideration of the economic meaning of regions follows. Then the specifics of the Australian constitution as it pertains to regional infrastructure, with a focus on transport, are presented. And the theory and practice are tied together to formulate an economics-based framework for optimal design for Australian infrastructure governance. The paper closes with some policy conclusions.

Komi Republic at the border of the XX and XXI centuries (the problems of socio-economic development)

The paper analyzes the problems of socio-economic development of the Komi Republic in the first decade of the XXI century. The pass through problems (demographic crisis, aging of the fixed assets, disproportions of reproduction) and new problems related to the reorganization of the property management systems and the production, differentiation of people’s incomes and expenditures, violation of the principles of economic federalism and financial crisis are highlighted. Solving of these problems is linked to the innovative development of the productive forces of the republic and the strengthening of interregional economic integration.

Reforms and Entry: Some Evidence from the Indian Manufacturing Sector

Traditional research in the context of product market entry has explored the strategic reactions of incumbent firms when threatened by the possibility of entry, and have identified industry-specific factors that affect entry rates. However, following de Soto (1989), there has been increasing emphasis on regulatory and institutional factors governing entry rates, especially in the context of developing countries. Using three-digit industry-level data from India, for the 1984–97 period, we examine the phenomenon of entry in the Indian context. Our empirical results suggest that during the 1980s industry-level factors largely explained variations in entry rates, but that, following the economic federalism brought about by the post-1991 reforms, variations in entry rates during the 1990s were explained largely by state-level institutional and legacy factors. Past productivity growth affects net entry rates as well.

Reforms, Entry and Productivity: Some Evidence from the Indian Manufacturing Sector

It is now stylized that, while the impact of ownership on firm productivity is unclear, product market competition can be expected to have a positive impact on productivity, thereby making entry (or contestability of markets) desirable. Traditional research in the context of entry has explored the strategic reactions of incumbent firms when threatened by the possibility of entry. However, following De Soto (1989), there has been increasing emphasis on regulatory and institutional factors governing entry rates, especially in the context of developing countries. Using 3-digit industry level data from India, for the 1984-97 period, we examine the phenomenon of entry in the Indian context. Our empirical results suggest that during the 1980s industry level factors largely explained variations in entry rates, but that, following the economic federalism brought about by the post-1991 reforms, variations entry rates during the 1990s were explained largely by state level institutional and legacy factors. We also find evidence to suggest that, in India, entry rates were positively associated with growth in total factor productivity.

Policy, economic federalism, and product market entry: the Indian experience

Productivity growth has long been associated with, among other things, contestability of markets which, in turn, is dependent on the ease with which potential competitors to the incumbent firms can enter the product market. There is a growing consensus that in emerging markets regulatory and institutional factors may have a greater influence on a firm's ability to enter a product market than strategic positions adopted by the incumbent firms. We examine this proposition in the context of India where the industrial policies of the 1980s and the 1990s are widely believed to be pro-incumbent and pro-competition, respectively, thereby providing the setting for a natural experiment with 1991 as the watershed year. In our analysis, we also take into consideration the possibility that the greater economic federalism associated with the reforms of the 1990s may have affected the distribution of industrial units across states after 1991. Our paper, which uses the experiences of the textiles and electrical machinery sectors during the two decades as the basis for the analysis, finds broad support for both these hypotheses.

Policy, Economic Federalism, and Product Market Entry: The Indian Experience

Productivity growth has long been associated with, among others, contestability of markets which, in turn, is dependent on the ease with which potential competitors to the incumbent firms can enter the product market. There is a growing consensus that in emerging markets regulatory and institutional factors may have a greater influence on a firm's ability to enter a product market than strategic positions adopted by the incumbent firms. We examine this proposition in the context of India where the industrial policies of the eighties and the nineties are widely believed to be pro-incumbent and pro-competition, respectively, thereby providing the setting for a natural experiment with 1991 as the watershed year. In our analysis, we also take into consideration the possibility that the greater economic federalism associated with the reforms of the nineties may have affected the distribution of industrial units across states after 1991. Our paper, which uses the experiences of the textiles and electrical machinery sectors during the two decades as the basis for the analysis, finds broad support for both these hypotheses.

Endogenous Policy Decentralization: Testing the Central Tenet of Economic Federalism

The economic theory of federalism is largely built around the premise that more heterogeneous preferences result in more decentralized policy making. Despite its prominence and importance, this central tenet of economic federalism has never been empirically evaluated. This paper presents the first formal test of the link between preference heterogeneity and endogenous policy decentralization using as a case study liquor control in the United States over the period 1934–70. The results are reassuring: States with more heterogeneous preferences are more likely to decentralize liquor control and allow for local government decision making.

Endogenous Policy Decentralization: Testing the Central Tenet of Economic Federalism

Endogenous Policy Decentralization: Testing the Central Tenet of Economic Federalism

The role of the Northern League in transforming the Italian political system: From economic federalism to ethnic politics and back

Until the early 1990s, Italy displayed a stable party system, where newcomers found it particularly difficult to challenge the overwhelming influence of the traditional parties: Christian Democrats (DC), Socialist Party (PSI), and Communist Party (PCI). New political formations managed to emerge, but they were largely unable to sustain their electoral success over a long period of time and failed to establish themselves as credible alternatives. The appearance of the Northern League (NL) in the late 1980s was also treated as temporary disaffection of sectors of the electorate from traditional politics. However, this proved not to be the case and the NL went on to become a very central player in the political system. This article examines the conditions for the emergence of the Northern League and its long lasting impact on Italian politics. The Northern League is partly responsible for major changes that occurred in Italy over the last decade and while its electoral fortunes have somewhat declined in recent years, the issues it brought to prominence are today very much central in political debates. The article argues that the NL, far from being a single-issue party, has a clear vision of what Italy in the new millennium should look like. Moreover, the article argues that this vision is similar to the one held by a number of right-wing parties in Western Europe such as Haider’s Freedom Party. Accordingly, the NL has abandoned its pro-independence position and has entered again into a political and electoral alliance with the centre-right Berlusconi-led coalition. This coalition is the favourite to win the 2001 national election and the NL is likely to hold once again a number of key ministerial posts. The presence of the Northern League in the new government will certainly accelerate the pace of decentralising reforms. The initial goal of federalism will probably be achieved after the NL went through a stage of profound radicalisation within which it flirted will independence. The failure of the Padanian project conceived in ethnic terms has brought the NL back to its roots and it is likely that Italy will soon be a federal state.

Endogenous Policy Decentralization: Testing the Central Tenet of Economic Federalism

The economic theory of federalism is largely built around the premise that more heterogeneous preferences result in more decentralized policy-making. Despite its prominence and importance, this central tenet of economic federalism has never been empirically evaluated. This paper presents the first formal test of the link between preference heterogeneity and endogenous policy decentralization using liquor control in the United States over the period 1934 to 1970 as our case study. The results are reassuring: states with minority groups that feel more strongly about liquor are more likely to decentralize liquor control and allow for local government decision-making.

Single currency, multiple budgets?

The painful process of convergence of national macroeconomic performances in order to comply with the Maastricht treaty criteria is coming to an end and the creation in time of the European single currency, probably with eleven members in the initial stage, is now taken for granted by most analysts and financial market participants. It is thus high time to think about how best to organise economic policy-making within the new euro zone. Although monetary unification will bring benefits for European consumers, there will also be costs, in particular due to increased competition within the single European monetary area. The combination of a single central bank and tax and fiscal competences retained, for the most part, by national governments necessitates an explicit coordination of fiscal policies for at least three reasons: macroeconomic stabilisation in Europe, especially in cases of asymmetric shocks; the "policy mix", i.e. the combination of monetary and fiscal policies at the European, aggregate level, and its influence on the external exchange rate of the euro; and the potential dangers of tax competition and "social dumping" , as national governments, deprived of their power over the exchange rate, may be tempted to gain a competitive advantage by other means. In the wake of monetary unification, the European Union will thus have to invent its own brand of "economic and fiscal federalism" , the recent creation of a "Council of the euro" being but one step in this direction.

The new regional economies: the U.S. common market and the global economy

Introduction and Overview The Nation as Economy Triumph of a Faulty Paradigm The Economic Region The Internal Interdependence of Regions Business Cycles and Local Economies Economic Federalism and the New Political Economy The Regional Economic Commons The Global Commons Intergovernmental Roles in Economic Policy-Making Policy and Governance for the Regional Economic Commons The United States Common Market Policy and Governance Afterword The Challenge and the Opportunity

Rethinking Federalism

The appropriate federal structure of government is now a policy issue of major debate. This paper identifies three approaches and compares their strengths and weaknesses. Economic federalism recommends the use of competitive communities for the provision of congestible local goods and a strong central government for the provision of pure public goods and spillovers. Cooperative federalism recommends intercommunity agreements; democratic federalism prefers a majority-rule representative legislature. Efficiency will sometimes conflict with other constitutional objectives--political participation and the protection of rights--and compromises will often be required.

Russia, ethnoregionalism and the politics of federation

Abstract This article examines the relationship between federation, transition and ethnoregionalism within Russia. It is divided into three parts. Part one examines the federalization of post‐Soviet Russia, teasing out in particular the initial problems associated with constructing a federation based on compromising the ethno‐republics and their conception of national self‐determination. In part two, the tensions generated between the centre and the ethno‐republics are considered by focusing on the relationship between federation and democracy, economic relations and fiscal federalism, and over cultural rights and autonomy. While it is noted that such tensions have fuelled ethnoregionalism, calls for full political sovereignty have been limited to only one ethno‐republic, Chechnya. Part three therefore examines why the appeal of secessionism has been limited by drawing upon resource mobilization theory. The role, in particular, that local political elites, communal identities, and economic viability play ...

The EMU and fiscal policy in the new European Community: An issue for economic federalism

The EMU and fiscal policy in the new European Community: An issue for economic federalism

Drinking, Driving, and Deterrence: The Effectiveness and Social Costs of Alternative Policies

TRAFFIC accidents are one of the leading causes of death in the United States and are the leading cause of death for people aged three to thirtyfour. It is estimated that alcohol is involved in approximately half of all fatal accidents.' The deaths and injuries of nondrinking drivers, passengers, and pedestrians both arouse public opinion and provide a clear-cut efficiency rationale for policies to correct the negative externalities.2 There are two types of policies aimed at reducing drunk driving. The first type of law attempts to deter drunk driving. The second type of law indirectly reduces drunk driving by controlling alcohol consumption, either in general or in high-risk groups. Examples of alcohol control policies

Toward a New Political Economy of Metropolitan Regions

The nation is not the real economy; nor are state or local political jurisdictions. Metropolitan-centered economic regions are the functional economies. These metropolitan economic regions are linked in a highly interdependent system of regional economies. This system of regional economies overlays the political geography of the nation but does not correspond to national boundaries, just as metropolitan economic regions do not correspond to state or local political boundaries. Policymaking thus confronts two major but noncongruent systems: Economic federalism and political federalism. Noncongruence constitutes a major obstacle to economic policymaking and implementation. A political economy of these two federalisms is needed to fuse politics and policy.

Economic Considerations and Reagan's New Federalism Swap Proposals

Economic Considerations and Reagan's New Federalism Swap Proposals