Guriev, Sergei; Yakovlev, Evgeny; Zhuravskaya, Ekaterina - C.E.P.R. Discussion Papers - 2008
The optimal degree of decentralization depends on the importance of inter-state externalities of local policies. We show that inter-state externalities are determined by spatial distribution of interest groups within the country. Interest groups who have multi-state scope internalize inter-state...