We analyze a model of resource allocation in a federal system in which the center transfers real resources between member states. The center is assumed to be unable to observe the precise value of the cost differences across jurisdictions that motivate the transfers. Moreover, the center cannot...

Relying on differentiability assumptions and on conditions that guarantee interior solutions, we show that a federation featuring decentralized leadership, interregional spillovers, and labor attachment allocates resources efficiently under two sets of circumstances. The first is when the center...

Becker's result that fines should be maximized is also applicable to some social environments where law enforcers are corrupt. If the regulated activity is legal, the principal may efficiently deter crime without an anti-corruption unit. An opportunistic anti-corruption unit, even when corrupt,...