We develop a model of Tiebout sorting based on decentralized income taxation, which allows for spillovers and imperfect rivalry in consumption of the publicly provided good. We identify three sources of welfare loss from decentralization: Imperfect redistribution, inter-jurisdictional...

The provision of public services through national legislatures gives legislators the chance to fund locally-beneficial public projects using a shared national tax base. Nationally-financed, local public goods will be purchased at a subsidized price below marginal cost and may be inefficiently...

The paper is intended to provide a theoretical contribution to the analysis of central government's normative economic policies in a framework where regional provision of goods with negative spillovers, and public goods used to reduce related externalities, are considered. Firstly the range of...

Should the constitution of a federation allow for peaceful secession? Constitutionally defined secession rules are optimal ex post if the federation breaks down. However, they may be suboptimal ex ante if the member countries receive a benefit from the perceived long-term stability of the...

This paper investigates properties of the second best allocation in a federation where regional governments provide a pure public good non-cooperatively and policy makers are neither entirely benevolent nor wholly self-serving. A high degree of household mobility across regions forces the...