No abstract

Tax competition, Mobility of factors of production, Fiscal federalism, H23, H77, H87,

In this paper we analyse in formal terms the desirability of the regionalisation of a National Health Service. The policy consists of a devolution process, i.e. the increase in the health services provision to be decided by a region and financed by an increase in its revenues. The change is a marginal one, as it regards the part of supply of the health services exceeding a minimum standard, which for purposes of equity is maintained uniform in the national territory. As the central government is responsible for this component of the provision of health care (a federal "mandate"), the level of the said component is chosen by this authority and financed by federal taxation. Moreover, the government also applies an equalisation scheme based on the difference between a standard level of tax revenues and the revenues which the region is deemed able to raise for this purpose. Within the theoretical context of welfare improving reforms with distortionary taxation, we derive two conditions which focus on the regional, as well as the social, convenience of regionalisation.

We analyse voting on devolution of responsibilities for the provision of public goods to local governments in a federal country, with a bicameral national legislature. We suppose that devolution is a …scal reform which reduces federal public expenditure on a national public good, and simultaneously increases transfers which regions receive from the State via a tax-sharing mechanism. This allows regions to augment their aggregate expenditure on a local public good which substitutes the reduction in a national public one. We show the conditions under which each chamber of the national parliament votes separately in favour or against devolution, and the conditions prompting the Federal government to carry out or to drop such a reform.