| Abstract: |
The aim of this paper is to analyse competition between two levels of
government that want to maximise their tax revenues facing the problem of
re-election. We assume that citizens have incomplete information about central
and local public goods. Then, they are not able to choose a single efficient
level of these two goods but they are able to choose a set of combinations.
This choice represent the constraint faced by the levels of government. We
develop a model starting from this assumption and three extensions to analyse
the behaviour of two levels of government in different scenarios. We find that
in each situation the equal sharing of the tax revenue is not the best
solution for the governments. |