A Dynamic Federalism Test
Federalism notoriously struggles with the allocation of competences between the federal and sub-federal levels. Legal doctrines vary across jurisdictions in how they allocate authority. From an efficiency perspective, the allocation is determined through a "federalism test" comparing the efficiency of each level of government. This comparison is difficult because which allocation will be more efficient in the future is uncertain and potentially endogenous to the current allocation. We formally define efficiency in such a context, show that a "static" federalism test that neglects endogeneity can fail to implement the efficient allocation, and propose a "dynamic" test to address the issue. We discuss the relevance of our results in light of jurisprudence in different policy areas.
With Jean-Edouard Colliard, HEC Paris Research Paper No. LAW-2025-1587
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