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

. 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 …

federalism in which centralization is less likely to occur where budget referendums are possible. The reason for this result is … that budget referendums reduce the extent to which pro-centralization regions can commit to a low level of spending … delegating the centralization choice to elected poli-cymakers. In addition, it reduces the ability of higher level policy …

The theory of fiscal federalism points out that decentralisation should be pursued in order to fit differences in … individual preferences. However, the presence of externalities and the need of providing merit goods to citizens suggest that … centralisation is likely to produce more efficient results. Moreover, in a political economy framework, each decision - including the …

the United States, although most of the arguments translate immediately to decision-making in other countries. There are …-cost analysis ; environmental policy ; decision making ; choice behavior ; public goods ; willingness-to-pay ; willingness …