A tale of conflicting principals: Candidate selection, party structure, and the politics of federal de/centralization

Centralization in federal countries can be explained by the incentives that a party’s selectorate generates for legislators. This paper examines how intra-party institutional structures shape federal decentralization by analyzing how Candidate Selection Decentralization (CSD) affects the vertical allocation of policy authority across 11 federations. Using within-country variation, I find a quadratic relationship between CSD and legislative decentralization. As CSD increases, legislators face Competing Principals Problems (CPP) between national leaders and subnational selectorates, weakening party cohesion. Yet this effect is non-linear: centralized selection fosters cohesion and centralization, while fully decentralized selection also reinforces centralization due to coordination failures. In contrast, intermediate levels of CSD—where subnational elites control nominations—empower state-level actors who promote decentralizing reforms in electorally or fiscally salient policy areas. These findings underscore the institutional role of intra-party rules in shaping the vertical distribution of power in federal systems.