The paper presents a Keynesian fiscal policy multiplier model with a federal system of government. The state and local government sector purchases over 60% of the goods and services purchased by the public sector, and receives transfer payments from the federal government. However, state and...

In a federation featuring decentralized leadership, regional governments compete by setting capital taxes in anticipation of the central government's fiscal-equalization and income-redistribution policies. As a benchmark, it is first demonstrated that the constrained socially optimal allocation...

This paper analyzes whether changes in the timing of equalizing transfers to state governments necessitate an adjustment in federal corrective policy. According to the existing literature (assuming an ex-ante choice of transfers), the corrective grant is equal to the marginal damage/benefit...