Constitutions, federalism, and national integration

Abstract

This paper offers a model of endogenous constitutional design in a setting where culturally and economically distinct regions establish a national union and bargain over the form of the government. We examine two aspects: the type of legislative decision rule (consensus or majority rule) and the central government’s power over the member regions (centralized or decentralized federalism). We show that (i) more centralized regimes emerge when the regions are culturally similar (e.g., same language or religion) and when the economic benefits derived from the union are high, (ii) if regions choose to govern by consensus rather than majority rule, the resulting legislation will produce higher centralization of power and thus lower regional autonomy, (iii) legislating by consensus, rather than by majority rule, produces more efficient unions but, under some circumstances, majority rule produces a more durable union. Our results carry insights into the historical evolution of nations, such as the inclusion of Scotland in Great Britain, and the current challenges facing the EU and other contemporary unions.