Municipal capitalism, regulatory federalism and politics

The phenomenon of municipal capitalism, which characterizes many local governments in Italy and Europe has been subject to many studies, but none have tried to model what this could imply for the choice of the optimal regulatory rule, nor for the vertical allocation of regulatory tasks among the various levels of government. The Author first considers the case in which a benevolent regulator -at the central or local level chooses the cost reimbursement rule. Then, the model will be expanded in order to analyze the effects that a partisan planner has on regulation.