The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Fiscal Federalism

  • David E. Wildasin
Reference work entry


Fiscal federalism is concerned with the division of policy responsibilities among different levels of government and with the fiscal interactions among these governments. Public service provision by lower-level governments can be efficiency-enhancing, although competition for mobile resources can also interfere with efficient resource allocation both in the public and private sectors. Intergovernmental transfers affect the overall equity and efficiency properties of public policies. Global economic integration and political and economic reforms in developing and transition economies – which have institutional contexts very different from those of the mature federations – present important challenges for a ‘second generation’ of federalism research.


Decentralization Factor mobility Fiscal competition Fiscal federalism Horizontal equity Intergovernmental grants Local public goods Optimal currency areas Planning Policy coordination Stabilization policy Tax competition Tax distortions Tiebout hypothesis 

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • David E. Wildasin
    • 1
  1. 1.