This work is a contribution to the Second Generation Theory (SGT) of fiscal federalism that studies fiscal federalism through contemporary economic and industrial organization theory. First, it establishes context by introducing the two classic motivations in support of federalism, namely, incentives and knowledge. Second, it succinctly discusses the incentive-based organizational approach of the SGT. Third, it shows that the Tiebout model already embeds an organizational approach, which instead rests on a knowledge motivation. The underlying theme is that the SGT should include both the incentive and knowledge motivations for fiscal decentralization.
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Paper provided by EconWPA in its series Public Economics with number
0509009.
Find related papers by JEL classification: D79 - Microeconomics - - Analysis of Collective Decision-Making - - - Other H10 - Public Economics - - Structure and Scope of Government - - - General H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
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