An Equilibrium Model of Federal Mandates

Joint with: Applied Micro

This paper proposes a framework for studying policy making in a federal system in the presence of spillover externalities. Local jurisdictions choose policies by majority rule subject to constraints that are set by majority rule, but at the federation level. We characterize

the induced preferences of voters for federal policies, prove existence of local majority rule equilibrium, provide an example of nonexistence of global majority rule equilibrium, and explore the welfare properties of federal standards with spillovers.

For more information, contact Antonio Merlo.