The traditional theory for fiscal federalism assumes that the lower tier is more efficient in producing local public goods because of information asymmetry, while on the finance side Central Government might be more efficient in raising resources that will then be distributed through...

This paper designs a new equalization-aid formula based on fiscal gaps of local communities. Using conceptual analysis and simulations with Massachusetts data, the authors illustrate the tradeoffs that policymakers face in deciding on the policy variables in the formula and lay out several...

In the current recession, politicians grant state aid of yet unknown dimensions. But what is the most efficient measure for granting such aid? We use a theoretical model with firms that differ in their creditworthiness and compare different types of direct subsidies with indirectly subsidized...

In many African countries, decentralization has long been viewed as a means for improving local service delivery. Yet, despite various decentralization initiatives, poor service delivery continues to be problematic in two of Kenya's largest cities, Nairobi and Mombasa. Despite various governance...