Voting on Devolution in a Federal Country with a Bicameral National System

We analyse voting on devolution of responsibilities for the provision of public goods to local governments in a federal country, with a bicameral national legislature. We suppose that devolution is a scal reform which reduces federal public expenditure on a national public good, and simultaneously increases transfers which regions receive from the State via a tax-sharing mechanism. This allows regions to augment their aggregate expenditure on a local public good which substitutes the reduction in a national public one. We show the conditions under which each chamber of the national parliament votes separately in favour or against devolution, and the conditions prompting the Federal government to carry out or to drop such a reform.