2007/08/13 by Catherine Hafer, Dimitri Landa · 1 citation
Social Sciences · Economics, Econometrics and Finance · #Local Government Finance and Decentralization #Fiscal Policy and Economic Growth #Economic Policies and Impacts
paper · doi:10.1561/100.00006001
openalex publication_date 2007/08/13 · openalex created_date 2025/10/10 · openalex updated_date 2026/05/21
We study a political-economic model of federations with both federal and supplemental regional provision of a local (impure) public good with spillover effects. Regional differences in average income levels and externalities of provision induce differences in preferences over federal and regional levels of provision. Although the voters’ preferences are not single-peaked, we provide sufficient conditions for the existence of voting equilibria and characterize their properties under alternative federal institutional arrangements. We show that, under different conditions on parameters, the voting equilibria display markedly different patterns of federal vs. local provision, relying on different political coalitions for their support. We show that the inter-regional redistributive tensions present in federations lead to differences in regional support for different degrees of fiscal (de-)centralization: federation, confederation, and complete centralization.