Does federalism make you happy?

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Andreas Pehr

13 June 2023

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Most see happiness as an essential goal in life. As states organize and influence many parts of our life, it is logical to ask the question of how state orders affect happiness.

In a federal state order, decision-making powers are shared. Not a single central level alone determines politics for everyone, subnational units have a say as well. This distribution of power enables political response being close to citizens and tailored to their needs. The ideal result: politically happy citizens. However, inter alia, high approval costs, slow decision-making or political confusion often related with federalism may counteract this ideal.

Federalism makes citizens happy

Political thought offers a range of arguments in favor of federalism. One major argument thereby is political proximity: local and regional decision-makers can provide customized and pragmatic alternatives to centrally complex bureaucratic procedures, thanks to their increased familiarity with local needs and circumstances. This increases the chance of politics accurately reflecting the citizens needs and demands. The second argument concerns political participation. Since decisions are made close to the citizens concerned, the incentive for the citizens to be part of the process and to let their individual opinion and knowledge flow into the decision-making is higher. This, in turn, supports the exchange of information with decision-makers and between citizens. The active and well-informed citizen thus improves the quality and sophistication of the political decisions made (Elazar 1993, Härtel 2012). The third argument concerns the political learning system. In a federal state, regions can act as ‘sandboxes’ in which new policy approaches can be tested and feedback on failed or successful programmes provided. As such, federalism functions as laboratory for social, economic and administrative experiments resulting in associated competition for best politics and best political practice (Tarr 2001). Thus, federalism means “smaller, directly accountable, self-governing political units, more responsive to the individual citizen […]” (Watts 2007:1ff., Yuschkow 2015). Consequently, citizens in federal systems might be happier and more satisfied with politics, have more trust in political institutions, and show high approval towards the political system.

Federalism makes citizens unhappy

Political thought also offers a range of arguments for potential federal downsides and disadvantages. For instance, federalism multiplies parliaments and politicians and the costs of reaching a decision increase with the number of actors involved (Buchanan and Tullock 1965), ergo making it harder to achieve political solutions. Moreover, regional decision-makers may have powers to pursue a noxious quid-pro-quo game with the center or even to block the state as a whole. This can make federalism expensive and central governments can be restricted or hindered in the implementation of important political projects. In the worst case, federalism leads to reform resistance, blockade politics or even ungovernability.

Because state power is shared, federalism can, create a situation where competencies are unclear and contested (Rodden 2006). By "adding layers of government and expanding areas of shared responsibility, it might facilitate blame shifting or credit claiming, thus reducing accountability" (Rodden 2004: 494). A federal structure can therefore be confusing for citizens and may make punishment at the ballot box impossible, or even hit the wrong politicians. Since citizens only have limited resources to monitor and control politics, multiple levels of government might, thus, actually prevent citizens from doing so (Franzese 2001). Overall, federalism can harbor obstacles that stand in the way of politically happy citizens, and rather creating political frustration.

In aiming to tackle this state-order-happiness linkage empirically, the subsequent cross-section analyses (OLS-regression) applies aggregated data of the seventh wave (W7) of the World Value Surveys (WVS) covering the years 2017-2020. Both federalism and decentralization are used as independent variables. While the binary variable "Federalism" relates to countries that identify as federal in their constitutions, “Political Decentralization” is measured according to the Regional Authority Index which is the sum of n_selfrule and n_sharedrule for the year 2018. Rival explanations to federal theory are included via control variables. The final dataset consists of 30 countries in total. According to world regions the sample contains following proportions: 40% Asian, 20% Latin American, 20% European, 6.6% Central American, 6.6% North American, 6.6% Oceanian countries. Federal countries make up to 30% of the sample.

In the first model, the happiness indicator "life satisfaction" represents the dependable variable whereas the second model applies the happiness indicator "satisfaction with the political system" instead. Both models share the same control variables. The analysis shows the statically significant effect that decentralization has on happiness in the first model – more decentralization = happier citizens. Albeit indicating a substantive potential, federalism does not hit statistical significance. When the dependable variable is switched to political satisfaction both independent variables show similar strength and the same positive direction as in the first model. However, in this analysis, federalism and decentralization, do not reach statistical significance.

Normatively, a good state is one that is able to maximize the political satisfaction of its citizens and maybe even their personal happiness and wellbeing. Political thought offers plausible arguments for and against federalism and decentralization in order to achieve political satisfaction among citizens. To demonstrate this, I have attempted to give an empirical impression to these thoughts. The analysis has shown that happiness (life satisfaction) does indeed become linear when influenced by decentralization while federalism per se does not. However, when the happiness indicator is switched to political satisfaction then both federalism and decentralization do not demonstrate a detectable effect – neither in positive nor negative terms. This is an interesting result which opens opportunities for further thinking and refined studies. Certainly, this topic deserves more intense and in-depth research, and this article hopes to contribute by initiating those research efforts – also beyond the Eurac Research Institute for Comparative Federalism.