This paper analyzes agreements between governments that determine the division of policy-making power between central and regional governments. Our analysis demonstrates that initial circumstances and political risks affect the degree of centralization that will be adopted, and that asymmetric...

Revamping fiscal relations across levels of government is of paramount importance in supporting fiscal consolidation and public sector effectiveness. This paper analyses a number of problems, including regulations that limit local governments’ ability to innovate and respond to local...

In about two decades, Spain was transformed from one of the most centralised countries to one of the most decentralised. Spending functions were devolved rapidly. The regions have exercised their discretionary powers quite extensively and innovative policies have been implemented. But devolution...

Education policy, while primarily the responsibility of the state governments, involves complicated decision making at the local, state, and federal levels. The federal involvement dramatically increased with the introduction of test-based accountability under the No Child Left Behind Act of...

In this paper we consider the case for assigning tax revenues to Scotland, by which we mean that taxes levied on Scottish tax bases should be returned to the Scottish budget. The budget, however, would continue to be supplemented by transfers from the Westminster budget. This arrangement differs...

We develop an endogenous growth model with public consumption and infrastructure services provided by two-tier governments. Growth performance and welfare implication are compared under the centralized and decentralized fiscal federal systems. In general, there is a trade-off between welfare and...