In fiscal interaction, a policy is evolutionarily stable if, once adopted by all governments, jurisdictions that deviate from it fare worse than those that stick to it. Evolutionary stability is the appropriate solution concept for models of imitative learning (policy mimicking). We show that...

This paper develops new measures of environmental costs and local revenue capacity as the basis for a new municipal aid formula in Massachusetts. On the cost side, unlike previous studies, we quantify the effects on local non-school spending of characteristics related to uncontrollable costs. On...

This paper gives a review on the theoretical foundation for fiscal decentralisation and a status quo analysis of the intergovernmental relations in Mongolia. It consists of two parts. Part I briefly reviews the theories of fiscal decentralisation and its impact on the nations’ welfare...

We set up a model to characterize the reaction functions of governments competing for mobile capital by simultaneously setting both the business tax rate as well as the level of provision of a productive public input. Using a rich data set of local jurisdictions, we then test the predictions of...

The majority of theoretical and empirical studies on the relationship between decentralization and corruption argues that the devolution of power might be a feasible instrument to keep corruption at bay. We argue that this result crucially depends on the possibility to monitor bureaucrat's...

The advantages and disadvantages of public sector decentralization are widely discussed in economics and political science. Some authors argue that decentralization leads to an optimal provision of public services and promotes economic growth, while others emphasize the dangers of competition...

The present work aims to explore the existing theories about the size of the public sector and test empirically in Brazilian municipalities. The theoretical model assumes that the economy has only two sectors: the public and the private. The latter receives productivity shocks while the former...

While the literature on how intergovernmental grants affect the budget of receiving jurisdictions is numerous, the very few studies that explicitly deal with likely endogeneity problems focus on grants targeted towards specific sectors or to specific type of recipients. The results from these...

In Ireland as in many other countries there has been an ongoing debate on the nature, degree and trends of regional imbalance, which has led to substantial research output. While much is now known about these trends, the degree to which they are ameliorated by existing public policies has not...

The paper compares decision-making on the centralisation of public goods provision in the presence of regional externalities under representative and direct democratic institutions. A model with two regions, two public goods and regional spillovers is developed in which uncertainty over the true...