One of the fundamental tenets of fiscal federalism is that, absent various sorts of externalities, decentralized governments that rely on own-source revenues should be more fiscally efficient than decentralized governments that rely on grant financing. The argument relies in part on the idea...

Recent experience with disasters and terrorist attacks in the US indicates that state and local governments rely on the federal sector for support after disasters occur. But these same governments are responsible for investing in infrastructure designed to reduce vulnerability to natural and...