Towards decentralized fiscal constitutions

Abstract

The theory of fscal federalism makes a strong case for decentralizing government functions in order to enhance efficiency in allocating public goods vvhere preferences differ among regions. Under political considerations, decentralized collective decision making fosters social and political cohesion at the level of the nation states by protecting minorities, by strengthening the accountabilit y of politicians, and by mobilizing citizens through greater participation at the local level. Federalism respects different cultural and individual tratidions among regions, and it emphasizes local diversity. Federalism thus reflects the regional dimension of democracy.