Constructing Self-Enforcing Federalism in the Early United States and Modern Russia

All federal systems face the two fundamental dilemmas of federalism:too strong a center risks overawing the subnational units; andtoo weak a center risks free-riding that makes the system fallapart. Resolving the two dilemmas is problematic because mitigatingone dilemma exacerbates the other. We develop a model of federalinstitutions that shows the circumstances under which both dilemmascan be solved so that federal institutions are self-enforcing.We apply our approach to modern Russia where we suggest thatwhen the center is too strong, its ability to extract rentsincreases and the benefits for maintaining participation inthe federal bargain disappears. We also suggest strong parallelsbetween Russia and those of the early United States under theArticles of Confederation.