In a federal state with weak political institutions, constituent units might protect their enterprises from enforcement of federal taxes. The effectiveness of such protection depends on the ability of local politicians to extract rents from enterprises. They can do so when local monopolies can...

I provide a critical overview of the literature on political decentralization. After reviewing first- and second-generation theories of federalism, I describe recent empirical studies focusing mainly on determinants of capture and local government accountability emphasized by second-generation...