Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 173: Distributional Conflict and Jurisdictional Organization

Karl Wärneryd ()
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Karl Wärneryd: Department of Economics, Postal: Stockholm School of Economics, Box 6501, 113 83 Stockholm, Sweden

Abstract: The paper explores the implications for explaining the endogenous formation of jurisdictions of modelling the political process as a costly fight to acquire shares of the GNP pie. It is shown, in particular, that a system of federalism is especially significant in ameliorating distributional competition and conflict. Less resources are spent in aggregate on appropriative activities under a hierarchical system of federalism than in a unified jurisdiction with a single central government. Furthermore, if mobility is costless, then a form of federalism may be preferred by all agents even if it destroys resources.

Keywords: Federalism; contests; rent seeking; jurisdictions; centralization

JEL-codes: D72; H11; H73

23 pages, May 1997

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