We propose a theory of tax centralization and inter governmental grants in politico-economic equilibrium. The cost of … traditional, expenditure-related motives for centralization considered in the fiscal federalism literature is present. If central … the local level. This renders the degree of tax centralization and the tax burden determinate even if none of the …

This paper provides an empirical test of a principal tenet of fiscal federalism: that spending discretion, when granted …

governments and, thereby, enable a more precise characterization of local government behaviour in fiscal federalism …

Recent literature has emphasized that redistributive grant systems may tend to internalize fiscal externalities arising …

federation, we show that vertical fiscal externalities can be the major determinant of the welfare change following environmental … externalities -- state governments can reduce greenhouse gas emissions by over 20 percent without any net cost to themselves …

. We identify an important asymmetry between positive and negative externalities and show that centralization may not be … efficient in economies with positive externalities even when regions are identical and centralization does not entail a loss of … accountability. We also show that decentralization can only Pareto dominate centralization in economies with negative externalities …