Central-government politicians channel resources to sub-national entities for political gains. We show formally that the central politicians' allocation decision has two drivers: political alignment (between central and local politicians) and the level of local political accountability. However,...

Central-government politicians channel resources to sub-national entities for political gains. We show formally that the central politicians' allocation decision has two drivers: political alignment (between central and local politicians) and the level of local political accountability. However,...

The classic theory of fiscal federalism suggests that different people should have different governments. Yet, separate local governments with homogeneous constituents often end up doing poorly. This paper explains why and answers three questions: when regions are heterogeneous, what determines...