Recent political and academic discourse about devolution has tended to stress the economic advantages of the transfer of power from national to subnational institutions. This 'economic dividend' arises through devolved administrations' ability to tailor policies to local needs, generate innovation in service provision through inter-territorial competition, and stimulate participation and accountability by reducing the distance between those in power and their electorates. This paper, however, outlines two related caveats. First, there are many forces that accompany devolution and work in an opposite direction. Devolved governmental systems may carry negative implications in terms of national economic efficiency and equity as well as through the imposition of significant institutional burdens. Second, the economic gains, as well as the downsides, that devolution may engender are contingent, to some extent, upon which governmental tier is dominating, organizing, propagating and driving the devolutionary effort.
