Rationalizing some features of government organization

Public spending, its size and composition, has been studied extensively in the public finance literature. Clearly, the amount of spending is not the best indicator of the government quality. Not only the size, but also the effect of spending has to be considered in order to make judgments about desirable features of government organization. This work is devoted to the evaluation of a federal government based on the efficiency of policies that it generates. Economic success of the government is then taken as a basis for rationalizing various features of government organization. Why are some taxes ‘more equal than others’? The chapter examines a rationale behind the uniformity of taxation for public projects. A benevolent risk neutral “constitutional designer” sets an optimal cost-sharing rule under the restriction of voting as the acceptance/rejection criterion. Then the designer will choose more uniform taxes for a country with more homogeneous tastes for public projects, which is in accord with a popular view. Higher quality projects provide an additional reason for this choice. Moreover, an exogenous requirement to use broader supermajority may also lead to more uniformity. Can decentralization be beneficial? A conventional justification for government hierarchy in the fiscal federalism literature is based upon asymmetry in policy tools or in information access that is available to different levels of government. This chapter demonstrates that even if these asymmetries are eliminated, an addition of local (regional) governments to a one-tier central government can be strictly welfare improving. An empirical inquiry of the efficiency of intergovernmental transfers for water projects based on the WRDA\u2786 data. The aim of this chapter is to check whether intergovernmental transfers for water projects accepted in 1986 can be rationalized by a simple efficiency criterion. The empirical findings support this conjecture only partially