Bulletin n. 3/2011
February 2012
CONTENTS
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
    • Eckhard Janeba, John Douglas Wilson
    Optimal fiscal federalism in the presence of tax competition
    in Journal of Public Economics , Volume 95, Issues 11–12 ,  2011 ,  1302–1311
    This paper models the optimal division of public good provision between central and regional governments. ► The optimal division involves a tradeoff between the inefficiencies from tax competition at the regional level and the inefficiencies from inefficient legislative behaviour at the central level, where public good provision is controlled by a minimum winning coalition. ► In our main model, complete centralization is never optimal: regional governments should always supply some public goods. ► It is possible for complete decentralization to be optimal. ► If the model is extended to allow regions to top off centrally-provided public good supplies, complete centralization may be optimal, but only if the inefficiencies in centralized provision are sufficiently small.
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