Creating a More Perfect Union:

Federal constitutions are viewed as incomplete contracts that must be renegotiated among self-interested, reelection-seeking politicians. Even when collectively sub-optimal, they are difficult to renegotiate if each state government faces electoral incentives to ignore externalities and federation-wide collective goods. Vertically integrated political parties help resolve this problem by creating "electoral externalities" that encourage politicians to sacrifice private benefits in order to receive credit for reform. Electoral externalities are measured and compared in Australia, Germany, and Canada. Case studies demonstrate that wide-ranging intergovernmental reforms have been compatible with politicians’ incentives on several key occasions in Australia and Germany, while the dearth of electoral externalities in Canada has consistently undermined them. An earlier version of this paper was presented at the 1999 Annual Meeting of the Midwest Political Science Association. The author wishes to thank Harvey Palmer, Susan Rose-Ackerman, and Pieter Van Houten for providing helpful comments, and Campbell Sharman and John Wilson for sharing data.