Should a subset of member states of a federation be allowed to form a sub-union on some policy issue? When centralization is not politically feasible, allowing an enhanced cooperation agreement among a subset of countries permits the latter to gain benefits which would otherwise be lost....

Recent literature has emphasized that redistributive grant systems may tend to internalize fiscal externalities arising from tax competition. This paper further explores the conditions under which local grant systems enforced by the state government will enhance efficiency. A system of...