The stability of multi-level governments
| Author | Enriqueta Aragonès,Clara Ponsatí |
| Date | 01 January 2021 |
| Published date | 01 January 2021 |
| DOI | 10.1177/0951629820984852 |
| Subject Matter | Articles |
Article
Journal of Theoretical Politics
2021, Vol.33(1) 140–166
ÓThe Author(s) 2020
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DOI: 10.1177/0951629820984852
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The stability of multi-level
governments
Enriqueta Aragone
`s
Institut d’Ana
`lisi Econo
`mica-CSIC and Barcelona GSE,Barcelona, Spain
Clara Ponsatı
´
European Parliament,Brussels, Belgium
Abstract
This paper studies the stability of a multi-level government. We analyze an extensive form game
played between two politicians leading two levels of government. We characterize the conditions
that render such government structures stable. We also show that if leaders care about electoral
rents and the preferences of the constituencies at different levels are misaligned, then the decen-
tralized government structure may be unsustainable. This result is puzzling because, from a nor-
mative perspective, the optimality of decentralized decisions via a multi-level government
structure is relevant precisely when different territorial constituencies exhibit preference
heterogeneity.
Keywords
multi-level governments;repression
1. Introduction
A government structure with more than one level is desirable for societies with het-
erogeneous preferences because it allows decentralized policy decisions. From a
normative view the implementation of different policies in regions with different
policy preferences is optimal, that is, overall social welfare is larger with decentra-
lized policy decisions than with a centralized decision maker that proposes the same
policy for all regions. From a positive view the decentralization of the policy
Corresponding author:
Enriqueta Aragone
`s, Institut d’Ana
`lisi Econo
`mica, CSIC, Campus UAB, 08193 Bellaterra,Spain.
Email: enriqueta.aragones@iae.csic.es
decisions allows for catering specific regional policies targeted to the policy inter-
ests of each regional population, thus decentralizing policy decisions is a way to
implement optimal policies when preferences are heterogeneous across regions.
A multi-level government structure is an instrument that aims at producing an
optimal policy decision in each region by decentralizing the policy decision process,
therefore multi-level government systems are more appealing in societies with
greater heterogeneity of preferences. However, at the same time that preferencehet-
erogeneity makes multi-level government structures more desirable, distinct elec-
toral competitions responding to the different constituencies may themselves fuel
demands that compromise the stability of the decentralized allocation of powers.
In particular, the national government’s response to a particular policy demand
arising from a regional government may be conditioned by its electoral prospects
in the nation-wide constituency, and thus may be driven away from the outcome
desired by the demanding region. If a region considers that the outcome obtained
from the multi-level government structure is unsatisfying, then incentives to try to
leave the multi-level government and move to separation may arise.
In order to examine the conditions for stability of multi-level governments we
construct a game theoretical model representing the interaction between two levels
of government. In particular, we assume thatone of the players is the party in office
in a national government whereas the other player isthe party in office of a regional
government. We consider the interaction that ensues after a regional constituency
proposes a policy demand that challengesthe prevailing status quo. We assume that
the regional government supports this regional demand, because its party’s elec-
toral rents largely depend on support from its constituency. The final outcome will
depend on the possibility of an agreement between the national and the regional
governments in terms of the policy implemented. Thestability of the system is guar-
anteed if they are able to reach an agreement, either by assuring to continue with
the existing status quo, or by a consensual revision of the decision power between
the two government levels. Otherwise, in disagreement, the lower government level
may decide to bid for break up, leading to a conflict scenario in which maintaining
the original government structure is possible only through repression, and even so
it may not survive.
We analyze the strategic interaction between the differentgovernment levels with
an extensive form game. We assume that there is a policy demand by the regional
government. The national government is supposed to move first,and has two possi-
ble actions: either to offer a solution in the line of accommodating the regional
demand, which implies a compromise between the two governments, or to ignore
the regional demand. Following the nationalgovernment’s action, the regional gov-
ernment chooses whether to acquiesce it or to disobey it. If the regional government
acquiesces, then the game ends, and payoffs are given by the compromise proposal
made by the national government, or by the status quo if no compromise was
offered. In either case the two-level government structure survives. Otherwise, fol-
lowing disobedience by the regional government, the national government must
choose whether to accept it and let the region go in a friendly separation, or else to
fight disobedience with repression.
1
Repression leads to a conflict between the two
Aragone
`s and Ponsatı
´141
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