Coase-Sandor Working Paper Series in Law and Economics

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Law & Economics Working Papers


Subconstitutionalism refers to two-tiered constitutional systems where a superior state and a group of subordinate states exercise overlapping control of a single population. Federalism is a familiar version of subconstitutionalism but scholarship on federalism focuses on the design of the superior state's constitution. Our focus is the design of the subordinate state's constitution. Our question is, how does the constitution of an independent state change when it becomes subordinate to another state in a federalist or related subconstitutional system? Applying agency theory, we argue that because the superior state reduces agency costs as between the subordinate state's government and its population, and because constitutional limits are best justified as means for reducing agency costs, it follows that subordinate state constitutions, or subconstitutions, should impose weaker restrictions on government (such as separation of powers), weaker rights protections, and weaker amendment procedures. We discuss evidence from the American states, the European Union, and the federalist systems of other countries.



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