Federalism and Incentives for Success of Democracy

Success and failure of democracy are interpreted as different equilibria of a dynamic political game with cost of changing leadership and incomplete information about politicians’ virtue. Unitary democracy can be frustrated when voters do not replace corrupt leaders, because any new leader would probably also govern corruptly. However, federal democracy cannot be consistently frustrated at both national and provincial levels, because provincial leaders who govern responsibly could build reputations to become contenders for higher national office. Similarly, democracy cannot be consistently frustrated in a democratization process that begins with decentralized provincial democracy and only later introduces nationally elected leadership.