In an economy with both inter- and intra-region inequality and inconsistency between the objectives of local and central governments, this paper studies optimal non-linear federal (central) income tax under non-linear regional income taxes. Starting with a benchmark model without labor mobility,...

Fifteen years of efforts to promote fiscal decentralization in China have failed to promote economic growth in China's provinces. This finding is surprising in the light of arguments that fiscal decentralization usually promotes provincial or local economic growth.Zhang and Zou use data on China...