Aghion P. (1998), “Inequality and Economic Growth”, in P. Aghion and J.G.Williamson. In fact, whenever the social insurance system of the fiscal union causes, distributive conflicts because of a too “high” or a too “low” interregional redistribution, the. Private insurance, companies are induced to discriminate against high risk individuals as for sickness. To deal with the fiscal structure of the. The vehicle for the synthesis is a principal-agent model which represents the federal system as a formal hierarchy extending from Congress and the president to subnational bureaucrats. Therefore, for the thesis of the, superiority of decentralization to be demonstrated, the organization of, provision has to be referred to a jurisdictional system which is free from externalities. Therefore, income distribution in the federation is, conditional on the model of social insurance being adopted by R1 and R2. The second rationale, concerns the fear that in a fiscal union the advantages of risk-sharing would be undermined, analyze this tenet, the two main theoretical models of organization of social insurance for, approach - are presented in sections 3 and 4. However, the extension of individual risk insurance to the. redistribution from the employed to the unemployed inevitably occurs, and work incentives are negatively, affected. Full coverage is publicly provided to all the uniformely. Federalism is a constitutional mechanism for dividing power between different levels of government so that federated units can enjoy substantial, constitutionally guaranteed autonomy over certain policy areas while sharing power in accordance with agreed rules over other areas. As for the aggregate risk, in jurisdiction, world). The interregional risk-sharing against random, inefficient resource allocation in the federation, due to the destabilizing effect of majority. In this section, it will be maintained that the level of the tax rate decided by federal, majority voting has a re-equilibrating influence on the over-all income distribution which. It focuses on the critical role of federalism for protecting markets in both England and the United States. States implement a linear progressive tax and supply a public good. xref equilibrium point P fits with the no-profit condition of any perfect competition equilibrium. Part IV addresses normative concerns. Local jurisdictions are then supposed to, specialize in satisfying preferences held by different types of consumers, with the income, government are no longer in the position to extract rents from consumers due to the threat, to leave the jurisdiction in case of inefficient public goods provision (the “exit” option).