In this paper, a micro-founded model dealing with the effects of regional sizing on economic growth is developed. Departing from bigger sizes, reduction involves more efficient public choices because of proximity to individual preferences and needs, but also creates the risk of underestimation of the real profitability of public expenditure by local governments due to cross border spillovers and “predator” behaviors. Hence the optimal size depends on the relative strength of both effects. Moreover, we show that different institutional arrangements between fiscal tiers involve different results for each possible size. Using data from the Spanish regions during the period 1984–1996, the relationship between productive spending and jurisdiction size is then analyzed. Copyright Springer Science+Business Media, Inc. 2006

We examine the effects of tax base sharing on the growth path of an economy in which central and regional governments provide heterogeneous educational services (general and specific training) which increase capital productivity. Our focus is the non co-operative game between two overlapping governments - central and regional - whose objective is to maximise their net tax revenues of educational spending (Leviathan hypothesis). We will show that the dispute between centralisation and decentralisation depends on two effects; the first is a "tax effect", which supports centralisation in that tax base sharing leads to overtax the common tax base, and so has a negative effect on the growth path. Second is a "public good effect", which defends decentralisation because the very diversity of central and regional educational services has a beneficial effect on the growth path (educational services are imperfect substitutes and "specific assets" of each level of government). We discuss the virtue of tax base sharing in a federation, as an "incentive scheme" within government's grasp. Copyright RSAI 2005.

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Health spending as a share of GDP stands in France at the average level of industrial economies and much below than in the US. Recently, spending has rapidly accelerated leading to a rise in public health insurance accounts deficits. This paper analyses the factors behind these changes: ageing populations, rising incomes boosting the demand for high quality health care, medical progress. At the macro level the future increases in social contributions that will be needed to balance health accounts should be planned. But reforms are also needed at the micro level to improve the efficiency of the health care system. The reform decided in 2004 introduces some elements of managed care (computerised medical records; referent doctor in charge of care coordination) but does not alter the core structure of a system that performs well for the majority of the French.