This paper provides an efficiency rationale for expenditure equalization in federations. It does so by developing a fiscal federalism model with two citizen types; immobile non-workers and mobile workers. Three decision-makers, a federal transfer authority and two states, play a game as Nash...

Economists have been concerned that sovereign communities may distort environmental policies to attract mobile capital. This paper provides something of a challenge to this idea. It does so by extending the model of Oates and Schwab (1988) to allow the supply of capital to a state, whether...