International Tax and Public Finance

, Volume 9, Issue 4, pp 379–389 | Cite as

Does Centralization Increase the Size of Government? The Effects of Separation of Powers and Lobbying

  • Isidoro Mazza
  • Frans Van Winden


Difficulties faced by the Economic and Monetary Union have strengthened the position of those who advocate a process of (further) political integration in the European Union (EU). A widespread fear is, though, that such a process would favor powerful interest groups able to lobby the EU policymakers. Persson and Tabellini (1994) argue that political centralization will increase the size of the government through lobbying because of free-riding incentives created by federally funded programs with localized benefits. We extend their analysis by presenting a model where the budgeting process is divided into two stages, instead of one, which better captures the EU institutional framework. A federal legislator (the Council) chooses the size of the budget at one stage, while a federal agency (the Commission) chooses the allocation of the budget at the next stage. We show that separation of powers in the budgeting process restricts free riding and, therefore, reduces the incentives to lobby. The result is an unchanged budget under centralization. Moreover, it is shown that if the lobbying activity is directed to both policymakers, competitive lobbying may actually reduce the size of the public sector under centralized policymaking.

lobbying centralization size of government separation of powers European Union decision-making 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Barrass, R. and S. Madhavan. (1996). European Economic Integration and Sustainable Development. London: McGraw-Hill.Google Scholar
  2. Bennedsen, M. (2000). “Political Ownership. ” Journal of Public Economics 76, 559–581.Google Scholar
  3. Bernheim, D. B. and M. D. Whinston. (1986). “Menu Actions, Resource Allocation, and Economic Influence. ” Quarterly Journal of Economics 101, 1–31.Google Scholar
  4. Bradbury, J. C. and W. M. Crain. (2001). “Legislative Organization and Government Spending. ” Journal of Public Economics 82, 309–325.Google Scholar
  5. Chari, V. V., L. E. Jones and R. Marimon. (1997). “The Economics of Split-Ticket Voting in Representative Democracies. ” American Economic Review 87, 957–976.Google Scholar
  6. De Grauwe, P. (1997). The Economics of Monetary Integration. Oxford University Press.Google Scholar
  7. Ferejohn, J. and K. Krehbiel. (1987). “The Budget Process and the Size of the Budget. ” American Journal of Political Science 31, 296–320.Google Scholar
  8. Grossman, G. M. and E. Helpman. (1994). “Protection for Sale. ” American Economic Review 84, 833–850.Google Scholar
  9. Grossman, H. I. and S. J. Noh. (1994). “Proprietary Public Finance and Economic Welfare. ” Journal of Public Economics 53, 187–204.Google Scholar
  10. Kletzer, K. and J. von Hagen. (2000). “Monetary Union and Fiscal Federalism. ” ZEI Working Paper B1.Google Scholar
  11. Mazey, S. and J. Mitchell. (1993). “Europe of the Regions? Territorial Interest and European Integration: The Scottish Experience. ” In S. Mazey and J. Richardson (eds.), Lobbying in the European Community. Oxford University Press, 95–121.Google Scholar
  12. Mazey, S. and J. Richardson. (1994). “Interest Groups in the European Community. ” In J. Richardson (ed.), Pressure Groups. Oxford University Press, 191–213 (reprint).Google Scholar
  13. Migué, J.-L. (1997). “Public Choice in a Federal System. ” Public Choice 90, 235–254.Google Scholar
  14. Obstfeld, M. and G. Peri. (1998). “Regional Non-Adjustment and Fiscal Policy. ” Economic Policy 26, 207–247.Google Scholar
  15. Persson, T. and G. Tabellini. (1994). “Does Centralization Increase the Size of Government?” European Economic Review 38, 765–773.Google Scholar
  16. Persson, T., G. Roland and G. Tabellini. (1997). “Separation of Powers and Political Accountability. ” Quarterly Journal of Economics 112, 1163–1202.Google Scholar
  17. The Economist. (1998). “Emu Survey, ” 11 April.Google Scholar
  18. The Economist. (1999). “Gambling on the Euro, ” 2 January.Google Scholar
  19. Weingast, B., K. Shepsle and C. Johnsen. (1981). “The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics. ” Journal of Political Economy 89, 642–664.Google Scholar

Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • Isidoro Mazza
    • 1
  • Frans Van Winden
    • 2
  1. 1.Department of Economics and Quantitative MethodsUniversity of CataniaItaly
  2. 2.CREED and Tinbergen InstituteUniversity of AmsterdamThe Netherlands

Personalised recommendations