Hamilton's Paradox

As new federations take shape and old ones are revived around the world a difficult challenge is to create incentives for fiscal discipline. A key question is whether a politically-motivated central government can credibly commit not to bail out subnational governments in times of crisis if it funds most of their expenditures. By combining theory quantitative analysis and historical and contemporary case studies this book provides a new perspective on why different countries have had dramatically different experiences with subnational fiscal discipline.