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The B.E. Journal of Economic Analysis & Policy

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Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Mendola, Mariapia / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine

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Moral Federalism

Eckhard Janeba1

1University of Mannheim,

Citation Information: Contributions in Economic Analysis & Policy. Volume 5, Issue 1, ISSN (Online) 1538-0645, DOI: 10.2202/1538-0645.1558, November 2006

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Many political issues like abortion, gay marriage or assisted suicide are strongly contested because individuals have preferences not only over their own choice but also about other individuals' actions. The paper models and compares the equilibria of three institutional regimes (ranging from centralized to decentralized decision making) in an economy where individuals choose their residence and vote over a single-dimensional regulatory policy at the regional and national level. Moral federalism describes a phenomenon where the majority of people who favor a restrictive policy try to impose their preferences through the federal government on jurisdictions where permissive policies are favored. The majority group's gain is larger, the smaller it is in size relative to the entire population. At the normative level, the outcome under centralized and decentralized decision making is the worst when societies are polarized. Allowing the federal government to restrict regional choices is never optimal.

Keywords: federalism; decentralization; Tiebout equilibrium; externality; morals

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