Las transferencias intergubernamentales y el tamaño del gobierno federal

In this article we study the role of inter-regional externalities of public goods, equity, and electoral competition in determining the budget of the central government on local public goods. The main results of the paper are: first, our model predicts that the federal budget on local public goods is proportional to a weighted average of national income and inversely proportional to a weighted average of the tax liabilities. Second, the size of the federal budget to finance local public goods is Pareto efficient. This result is different to the prediction of other models of political economy such as the median voter model and the model of Leviathan which predict that fiscal policy is not Pareto efficient. Finally, in this paper we provide empirically verifiable hypothesis of how both the distribution of income, and population, and the formula of intergovernmental transfers can determine a high (or low) size of the federal budget that finances the provision of local public goods.