Economists generally assume the existence of sufficient institutions to sustain a market economy and tax the citizens. However, this starting point cannot easily be taken for granted in many states, neither in history nor in the developing world of today. This paper develops a framework where...

Inspired by current European developments, we study equilibrium fiscal policy under alternative constitutional arrangements in a `federation' of countries. There are two levels of government: local and federal. Local policy redistributes across individuals and affects the probability of...

A political constitution is like an incomplete contract: it spells out a procedure for making decisions and for delegating power, without specifying the content of those decisions. This creates a problem: the appointed policymaker could use this power for his own benefit against the interests of...

Economists generally assume the existence of sufficient institutions to sustain a market economy and tax the citizens. However, this starting point cannot easily be taken for granted in many states, neither in history nor in the developing world of today. This paper develops a framework where...