Motivated by the recent experience in the Russian Federation, this paper examines the implications of imposing central control on the budgetary activities of a subnational government. In a highly stylised multi-task principal-agent model (Holmstrom and Milgrom (1991)), a central government...

The government's incentives to bail out inefficient projects are determined by the trade-off between political benefits and economic costs, the latter depending on the decentralization of government. Two effects of federalism are derived: First, fiscal competition among local governments under...

Aligning the interests of local governments with market development is an important issue for developing and transition economies. Using a panel data set from China, we investigate the relationship between provincial government's fiscal incentives and provincial market development. We report...

Motivated by the Russian experience, this paper examines the implications of imposing central control on the budgetary activities of a subnational government. In a multi-task principal-agent model, the center cannot monitor directly the informal budgetary operations of a region, but it can exert...