Economics Commons^™

This article provides an overview of the political economy of federalism. The core of the article focuses on the classic Tiebout framework and its support for a decentralized federal system. However, the article goes beyond the Tiebout world in suggesting a framework that is expanded to take into account bargaining among governmental units. The article also describes political models of legislative and executive branch decision making that suggest the potential benefits and costs associated with centralized government. Ultimately, the choice of an “optimal” level of decentralization depends on the relative importance one places upon economic efficiency and the potentially competing …