| Abstract: |
This paper revises the classic trade-off between centralized and decentralized provision of local public goods. It studies the performance of centralization under different tax systems and compares them with decentralization. It argues that a conflict of interest between citizens in different regions caused by shared costs is significantly suppressed or completely eliminated when district specific head-tax is introduced. The outcome then depends on the degree of spillovers, heterogeneity in tastes for public spending and the mechanisms in which the centralized legislature composed of locally elected representatives works. |
